iShares S&P/TSX Energy Index (XEG) chart analysis

Near-term uptrend for XEG but the major trend is down
A six month candlestick chart for iShares S&P/TSX Capped Energy Index (ticker:XEG) showing the near-term uptrend and resistance levels.  RSI is confirming the neart-term uptrend but the intermediate trend is sideways and the major trend is down.

iShares S&P/TSX Capped Energy Index (XEG) 6-Month Chart

With a weighting of 27.88% in the S&P/TSX Composite Index, the energy sector holds the key (along with materials—16.88%) for the continuation of the uptrend in the index. But with the underlying commodities, including oil and natural gas, not breaking out to the upside; it is hard to be optimistic. And then there is the frustrating Canadian crude oil differential due in part to pipeline constraints. The differential compared to world oil prices (Brent) is around $50.00 per barrel. Canada imports around 40% of the oil it consumes. So eastern Canada is paying world prices for crude and western Canada is losing $1.5-billion a month because of the differential. The oil visionaries out west, with the “let eastern Canada freeze in the dark mentality”, were not the great oracles. Who needed to ship oil to the east when our friends to the south would take all we could produce out west? You have the answer today and there is no easy solution. Pipelines cannot be built in a day and the U.S. is able to squeeze more and more out of their wells due to advances in drilling technology—hydraulic fracturing.

The financials, with a weighting of 29.62%, have done the heavy lifting and are up over 19% from the November, 2012 low. But the financial sector is close to major resistance levels and is due for a consolidation or correction.

XEG – S&P/TSX Capped Energy Index Fund – Suncor represents 18.60% of this fund.

Reference the last chart analysis for the S&P/TSX Index posted on January 18, 2013

Reference the last chart analysis for XEG posted on September 18, 2012

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Note: Click on HOME for updated postings. This technical analysis is for educational purposes so you can learn to trade online using candlestick charts and other technical indicators including volume, moving averages and oscillators. Please conduct your own chart analysis or consult your financial advisor before making investment decisions. The chart snippet is from which I recommend and have used for fifteen years. The author of this article may hold long or short positions in the featured stock or index.

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