Is There Resistance Above for Energy Select Sector SPDR?

Published on Thursday, 05 July 2012 08:42 Written by TradersHuddle Wire

New York, July 5th (TradersHuddle.com) - Energy Select Sector SPDR (NYSE:XLE) closed the trading day at $67.99, near its 50 day and 200 day moving averages set at $65.94 and $68.74 respectively. Energy Select Sector SPDR's price action placed the stock above the 50 day moving average but below its 200 day moving average, providing a nice trading setup with clear reference points.

Energy Select Sector SPDR (NYSE:XLE) is an ETF that seeks to provide investment results that correspond to the price and yield performance of the Energy Select Sector of the S&P 500 Index. Energy companies in the Index primarily develop and produce crude oil and natural gas, and provide drilling and other energy-related services. The Fund utilizes a passive or indexing investment approach to attempt to approximate the investment performance of the Index.

Energy Select Sector SPDR seems to be setting up for a tight range between the 50 day moving average as support and the 200 day moving average serving as resistance.

A tiered approach appears to be the best way to maximize possible movements in the stock, as traders could establish a small position in Energy Select Sector SPDR and wait for the stock to break out above the 200 day moving average at $68.74. Then they could add to the position as momentum builds with the breakout. On the other hand, if support being referenced at the 50 day moving average set at $65.94 breaks, it could signal further downside for Energy Select Sector SPDR in the horizon.