[briansmith456]

I was wondering if perhaps this chart says crude  oil (WTIC) is a buy if it breaks 62.50? Perhaps a break above will start to see WTIC price outperform SPX price. In the same token I am thinking XLE is a buy if it breaks the trendline as the 30 ema, 30 sma and 10 sma should start curling up if it breaks above the trendline.

The main issue with oil with regards to the method currently is that it has the weakest Relative Performance versus the market. If you read page 75 in the book (The Forest to the Trees approach) you'll see that this is the opposite of what we want to see.

I've marked up the weekly charts of both, but they each show a well defined Stage 1 range currently, and very poor Relative Performance versus the market. One of the key things to look for before a move into Stage 2 imo, is for the relative performance to be either at least in inline with the market for a few months or outperforming the market and above its zero line.

From my own research of thousands of charts over the years, the "zero line" itself (52 week simple MA of the relative performance versus the S&P 500) should be at least flattening when a stock moves into Stage 2A, but ideally starting to rise. And the relative performance line should be above it.

There are lots of big moves when a stock/index is bottoming and trying to form a Stage 1 base, and it can be tempting to try and trade in it. But, the risks are much higher than trading only Stage 2, as there's still a lot of prior supply to deal with. So my advice is to limit your risk as much as possible and try not to bottom fish in Stage 1, as its not what Stage Analysis is about.

I recommend that you read the Stage Analysis Study Guide - Questions and Answers thread, and work through the examples, as it will help you to understand the differences in quality and what to look out for.

Thanks, Isa for the charts and explanation.

I was not aware of it being high risk even if the price breaks above a down sloping price line so thanks for pointing that out. So one would look to oil and XLE if price were to ever be above at least a flat price line (I notice in 2017 of Oct. price broke above a flattish price line and oil went much higher).
Brian