Energy May Be Turning On - Update 4

XLE Daily

Today's price action is both good and bad. 

Its good because we gapped up at the open. We made a higher high and a higher low. We closed above the 8ema, and also the 3ema.

Its bad because we gapped up on high Stochastics. This could be interpreted as an "Exhaustion Gap".  Exhaustion Gaps can indicate an end to the current trend, which would mean price starts heading down from here. We also came close to forming a Dark Cloud Cover candlestick pattern. Such a pattern can also indicate an end to the current trend.

A Dark Cloud Cover needs to close below the 50% midpoint of the previous candle. The endpoints of the previous day's candle body are 72.13 - 73.76. The midpoint is (72.13 + 73.76)/2 = 72.95. The endpoints of the previous day's full candle are 71.27 - 73.83. The midpoint is (71.27 + 73.83)/2 = 72.55. Today's close was 73.09, so technically we did not form a Dark Cloud Cover candlestick pattern. 

If you look at the red candle from 7/22/22 and the green candle before it, you'll see a valid Dark Cloud Cover candlestick pattern. However, even though that was on high Stochastics, we continued upward this week. Another example of the same thing are the candles from 5/31/22 and 5/27/22. You can see them on the chart above.

After considering what was on the chart at the end of the day today, I decided to hold the position.