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.
Contributor
Harry Richardson — Algorithmic Trader & Strategy Developer Harry is an algorithmic trader specializing in impulse and breakout trading strategies across cryptocurrency and equity markets. With more than 10 years of experience in developing automated trading systems, he focuses on building structured algorithms designed to capture momentum while maintaining strict risk control. His approach combines quantitative analysis, real-market execution, and continuous performance monitoring. Vitalii prioritizes risk management, drawdown control, and strategy stability over short-term optimization, ensuring algorithms are adaptable to changing market conditions. He has developed and tested hundreds of automated strategies, working extensively with live trading environments, forward testing, and portfolio-level algorithm management. His work centers on transforming trading ideas into fully operational, scalable automated systems.
XLE's RSI Indicator recovers from overbought zone
The 10-day RSI Indicator for XLE moved out of overbought territory on September 03, 2026. This could be a sign that the stock is shifting from an upward trend to a downward trend. Traders may want to look at selling the stock or buying put options. Tickeron's A.I.dvisor looked at 45 instances where the indicator moved out of the overbought zone. In 40 of the 45 cases the stock moved lower in the days that followed. This puts the odds of a move down at 89%.
Technical Analysis (Indicators)
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In 54 of 65 cases where XLE's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are 83%.
The Momentum Indicator moved below the 0 level on September 16, 2026. You may want to consider selling the stock, shorting the stock, or exploring put options on XLE as a result. In 73 of 85 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are 86%.
The Moving Average Convergence Divergence Histogram (MACD) for XLE turned negative on September 10, 2026. 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 51 similar instances when the indicator turned negative. In 42 of the 51 cases the stock turned lower in the days that followed. This puts the odds of success at 82%.
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 50 of 62 cases within the following month. The odds of a continued downward trend are 80%.
Bullish Trend Analysis
Following a +1.95% 3-day Advance, the price is estimated to grow further. Considering data from situations where XLE advanced for three days, in 356 of 390 cases, the price rose further within the following month. The odds of a continued upward trend are 90%.
The Aroon Indicator entered an Uptrend today. In 307 of 344 cases where XLE Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are 89%.
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