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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Divergence Between Oil and Oil Stocks Signals Decline in Oil-Related ETFs

Commodities / Oil Companies May 17, 2016 - 05:30 AM GMT

By: The_Energy_Report

Commodities

Technical analyst Jack Chan reports the energy sector cycle is down and a multiweek correction is in progress, and discusses what that means.



Our proprietary energy cycle indicator turned down last week from the divergence as noted previously.

OSX Oil Services Index

We have a serious divergence this week between oil and oil stocks. Such divergences have almost always led to a substantial decline in prices in oil-related ETFs.

DUG ProShares UltraShort Oil & Gas

It so happens that we have a new buy signal and set up on the inverse ETF this week.

Summary
The energy sector cycle is down and a multiweek correction is in progress. Traders can consider shorting the sector via an inverse ETF, and manage their risk by using stops.

Jack Chan is the editor of Simply Profits at www.simplyprofits.org, established in 2006. Chan bought his first mining stock, Hoko Exploration, in 1979, and has been active in the markets for the past 37 years. Technical analysis has helped him filter out the noise and focus on the when, and leave the why to the fundamental analysts. His proprietary trading models have enabled him to identify the NASDAQ top in 2000, the new gold bull market in 2001, the stock market top in 2007, and the U.S. dollar bottom in 2011.

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Disclosure:
1) Statement and opinions expressed are the opinions of Jack Chan and not of Streetwise Reports or its officers. Jack Chan is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation or editing so the author could speak independently about the sector. Jack Chan was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

All charts courtesy of Jack Chan.


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