OIL STOCKS: IS THIS EXTREME SHORT CONDITION NEGATIVE FOR AN INVESTOR?

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A nice chart from SentimenTrader.com indicates that the Oil Stocks sector has reached an extreme level:

over 90% of the stocks in the Energy sector have the RSI above 70. It would seem that whoever has them must sell?
Quite the contrary – if you are a medium-long term investor – and for 2 very specific reasons:
1) the rise in the short term of the RSI was also seen at the beginning of the Bull Market in this sector at the beginning of the decade of 2000: it only means that stocks have reacted by giving a signal of strength in the short term and that only a consolidation is necessary to cool this indicator
2) if I look at the monthly chart I see that a bearish head and shoulders on the XOI was completed with a deep movement in an almost millimeter. The classic movement that followed (rebound, correction and then new rise) is a classic pattern of strength found in the early stages of the bull markets. If we also add the fact that the indicators, the positive divergences, the double lows present are all ideal ingredients for a ten-year bottom, I would say that the SentimenTrader.com  chart is to be understood in a … positive sense.
For further information, analysis of the stocks that could perform better, to keep up to date on this sector and other opportunities that already exist today, I suggest you take advantage of the 7-day free trial which is still possible today.

 

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