this bugger: is approaching 2008 High UP >50% since summer keeps going UP along the almost perfectly straight line OIL keeps pushing higher and the Middle East/Africa is on Fire BUT: there is RSI divergence SPY is shaky, could it pull XLE down? what if Libya stabilizes soon? other thoughts?
Yes, it is totally insane to short this. Do not try to catch a falling knife. There is no evidence, at all, of any kind, of a trend change. If you short it and win, you will blow up. Luck and systemic trading are completely different animals.
Do not chase a trend, you are too late. You must wait for a pullback to get long, and a failure of that pullback go get short. Impatience is expensive.
both sold off after the divergence was in place for some time. similarly, RSI divergence for XLE has been building up for a while.
I see that also, but I would ignore any sell signals until 75.22 is broken to the downside. That is the nearest old fractal high. Until then weakness has to be considered profit taking, and not a reversal.
If you wanted to short XLE, I would do it as a relative value spread play against one of the components within the basket that has been especially strong in the rally and that you would expect to continue to outperform the balance of the basket in a broad market sell-off. My 2 cents.
but you are making an assumption that the technically strong stock will continue to be strong. the assumption is so simple it can't be correct >50% times. unless you have some fundamental insight to help select the best stock going forward, your spread strategy won't work.