Oil Stocks Break Support; Poised For More Downside Into Year End

A clean break of support in the energy sector today as OPEC disappointed on Friday and institutions liquidate losing positions into year end:

 

XLE (Daily)

XLE_Daily_12.7.2015

 The volume and velocity of the recent decline is particularly significant – the August lows look like the next downside target for XLE.

We saw a similar scenario last year with an early December decline in the energy sector as portfolio managers got losing positions off their books:

XLE September 2014 – March 2015

XLE_Daily_12.7.2015_001

The current bloodshed in the oil patch could set up a buying opportunity within 1-2 weeks, however, over the coming days it is likely that the sector will get more oversold and sentiment will continue to deteriorate.