XLB Chart – December 14, 2009

I charted the year to date daily prices for XLB late in the trading day on Monday, December 14th when it was trading at $32.86.  It’s kind of a mixed chart of pick your trend line, pick your story.  The two longest (and therefore most important) trend lines are the darkest below and show a narrowing trading channel that could still last another month or longer.  The other three trend lines are shorter and still have something to prove.  The top one shows potential resistance earlier than the longest trend line of higher highs.  The middle thin line has been a consistent floor for XLB for the past month.  It could come back into play within the next week or so when the longest trend line of higher lows converges with it adding extra support.  The next thin line down shows the most consistent trend of higher lows over the past five months.  Although that line broke for a few days at the October/November mark, it’s still worth watching.  The trouble with that line is that it’s now below the longest trend line of higher lows and if this longer line breaks and much bigger correction could be in store.

XLB is going to be a fun one to watch more closely for the next few weeks.  For now, the $31.00 area looks like a good entry point if support holds, but waiting that long to get in could risk of missing out if the flat line of support that’s closer to $31.75 holds.  Upside potential probably isn’t much greater than $33.50 in the short term.