XOP Forms a Potential Bear Trap

The Oil and Gas Exploration and Production industry has been hammered. I typically have no interest in weak sectors...until there's a potential bear trap which sets up a major bullish opportunity. That setup could be underway now.

A few weeks ago XOP broke below the 2016 low, consolidated, and has since jumped back above the 2016 low. This was on massive volume. Volume has been escalating, and in July and August, it looks like the bulls threw in the towel as the price went below the 2016 low. This has been followed by even larger volume to the upside this week. A nice shift from fearful and excessive supply to hungry demand.

The profit target is a relatively conservative estimate from this oversold condition. But of course, we'll have to see. This a medium-term trade, and will likely take 9 to 18 months to unfold.

Disclosure: Likely initiating a long this week.