Hey Market Pilot,
Technical analysis is about pattern recognition and knowledge of your indicators. For me, combining these two helps me prepare for what the market might do next so I can take advantage of it or get out of the way.
Right now, I am seeing a familiar pattern with the Moxie Indicator™ show up on the Energy Select Sector SPDR Fund (XLE). I knew what it was telling me, but I wanted to see if I could find an example of that pattern that has already played out so I could show you what it is I am expecting and why.
Below is XLE with the daily chart on the left, and hourly on the right. The important part to see is that the hourly Moxie Indicator™ has gone flat despite price still climbing. This is a negative divergence and is telling me that momentum is coming out of price and that a pullback is likely. The greater trend may still be intact, but for this period and this time frame, I would prepare for price to drop.
However, if you have never seen the Moxie Indicator™, this may not mean much to you, so let me show you a completed example.
Below is a screenshot of XLP with the same daily chart on the left and hourly on the right. Note the line I drew over the hourly Moxie Indicator™ and how it is flat, just like the XLE example above.
Also, note that the hourly Moxie Indicator™ is flat compared to an upward price. Again, this is negative divergence and it led to price pulling back pretty significantly. The greater trend seems to be in place since price held support at the daily 50 simple moving average (SMA), but there was still a pullback to be aware of here.
If you had the Moxie Indicator™, you would be able to better manage your trade by…
1) Not buying right before a pullback
2) Taking some profits
3) Waiting for the dip to buy
Time will tell if my read on XLE is correct, but given the similarities of the pattern, I would at least take it into consideration and start looking for that scenario to prove itself.
Your Profit Pilot, TG
Want more analysis? Catch TG’s latest free webinar where he discusses current market action and how he is identifying actionable setups through volatile market conditions.
