Energy Sector SPDR hitting downward sloped trend line
Recently I have written several articles about energy stocks and all of them have been bearish in nature. The stocks have been trending lower and there are a number of them that have poor fundamentals. Tonight, the Energy Select Sector SPDR (NYSE: XLE) caught my attention, or at least the chart did.
The XLE was on a bearish scan that I run each night and as I scrolled through the charts, I couldn’t help but notice how the highs from April, July, and the last two days all connected very nicely with a downward sloped trend line. I also took it upon myself to draw a parallel line to see if the lows connected to form a trend channel. They do to some degree, but the lower rail isn’t nearly as clean as the upper rail.
We see that the overbought/oversold indicators are both at overbought levels and the stochastic readings just made a bearish crossover on September 11.
In addition to the bearish crossover from the stochastic readings, the Tickeron Technical Analysis Overview shows that the higher Bollinger Band was broken. A price fall is expected as the ticker heads toward the middle band, and that invites the trader to consider shorting the XLE, or exploring put options. In 25 of 29 cases where XLE's price broke its higher Bollinger Band, its price dropped further during the following month. The odds of a continued Downtrend are 86%.
The Tickeron Trend Prediction Engine generated a bearish signal on the XLE on September 9. The signal showed a confidence level of 62% and it calls for a decline of at least 4% within the next month. Past predictions on the ETF have been successful 85% of the time.
One of the reasons the energy stocks keep catching my eye is because of the poor fundamentals. When I run my scans each night, there is a bullish list and a bearish list and those scans are based on technical factors. After I get these lists, I run another scan on Investor’s Business Daily to get fundamental ratings using the EPS rating and the SMR ratings as a basic overview of a how a stock is doing fundamentally. I also check Tickeron’s technical analysis and fundamental analysis overviews.
When I saw the XLE on the bearish list, I ran a scan for the top 10 holdings in the ETF to get the EPS rating and the SMR rating from IBD. I put together the following table from that scan.
The average EPS rating of the top 10 holdings in the XLE is 27.8 and that shows poor earnings growth for the sector as a whole. I assigned a number to the SMR rating—5 for an A, 4 for a B, 3 for a C, etc. The average SMR rating is a C+ or 3.5. This shows slightly better than average sales growth, profit margins, and ROEs for this group.
Overall, the fundamental picture for the energy sector isn’t very good based on these findings.
Something else to keep in mind regarding oil and energy stocks is that oil itself has been the subject of geopolitical developments recently. Okay, oil is always the subject of geopolitical developments, but current tensions seem to be elevated with different ships being held in the Persian Gulf.
There are also some that believe the sanctions on Iran will be eased after the firing/resignation of National Security Adviser John Bolton. If the sanctions are eased, there will be more oil on the market or an increase in supply. Oil dropped 2.5% on September 11.
Momentum Indicator for XLE turns negative, indicating new downward trend
XLE saw its Momentum Indicator move below the 0 level on October 08, 2025. This is an indication that the stock could be shifting in to a new downward move. Traders may want to consider selling the stock or exploring put options. Tickeron's A.I.dvisor looked at 89 similar instances where the indicator turned negative. In of the 89 cases, the stock moved further down in the following days. The odds of a decline are at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Moving Average Convergence Divergence Histogram (MACD) for XLE turned negative on October 02, 2025. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 45 similar instances when the indicator turned negative. In of the 45 cases the stock turned lower in the days that followed. This puts the odds of success at .
The 10-day moving average for XLE crossed bearishly below the 50-day moving average on October 16, 2025. This indicates that the trend has shifted lower and could be considered a sell signal. In of 17 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where XLE declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
Bullish Trend Analysis
The RSI Indicator points to a transition from a downward trend to an upward trend -- in cases where XLE's RSI Indicator exited the oversold zone, of 21 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Stochastic Oscillator suggests the stock price trend may be in a reversal from a downward trend to an upward trend. of 60 cases where XLE's Stochastic Oscillator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
XLE moved above its 50-day moving average on October 22, 2025 date and that indicates a change from a downward trend to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where XLE advanced for three days, in of 380 cases, the price rose further within the following month. The odds of a continued upward trend are .
XLE may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 302 cases where XLE Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
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