Daily Chart Confirms Support Zone
On the daily chart, XLE reclaimed both the 20-day and 50-day moving averages on Tuesday, and support was confirmed near those averages, with Tuesday’s higher daily low of $57.38. The reclaim of the two moving averages was confirmed by the session’s close above their price zone near $57.40. Notably, the breakout day occurred as the moving averages converged and identified a similar price level. This convergence of two indicators on a breakout day can sometimes lead to clearer price reactions. As a result, two bullish signals occurred on the same day, along with a new minor trend high.
Strength suggested by the reclaim of two key moving averages on the same day will begin to weaken on a sustained decline below Tuesday’s low. That would indicate a failure of support at the moving average convergence zone. Until then, the recent reclaim of trend support keeps the broader bullish structure intact. As often happens in strong trends, the first pullback after a key breakout can serve as a launching point for the next advance.
