Crude is Right Near the End of this 3-Wave Structure …

Lots of people waking up to the move that crude and energy stocks have made since I talked about a possible swing low in energy stocks back on August 29th (see post here and here).  Like happens often, the market pundits and talking heads starting recommending the sector as we push into resistance levels/zones (i.e., the SLOT).  Here is how I see the charts …

Crude Futures – Daily Chart

Crude is pushing right into the measured 1.272x target for the 3rd wave of the move coming off of the low made this past summer … I see 3 nice waves to the move and three minor waves in the bigger wave 2 and the terminating wave 3.

So for traders that don’t trade crude futures, how do they capitalize on this end to what could be only the first leg higher in crude in a bigger commodity rally that could play out over the next several years?

S&P Energy Sector – Daily Chart

The light blue warning candles that my software is painting, warns traders of an extended move in price away from the slower moving averages … the “return to the mean” effect is telling traders to take profits here in the short-term and/or sell some short-dated at-the-money or near-the-money calls for XLE or ERX the leveraged bullish ETFs for the energy sector.

3x Bullish Leveraged Energy Sector ETF – Daily Chart

The January monthly $40 calls for ERX can be sold for just under a dollar today …. I will look to sell some of these as well as looking for intra-day moves to the downside, as the intra-day moves lower are likely to be bigger than the shorter-term moves higher.

Cheers … Leaf_West

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