See the longer-term chart of the XLE, which shows the massive uptrend off of the July 2002 low at 19.39 to the 60.15 high in May 2006. My work argues that the three-fold appreciation represents a completed upleg, and that the oil sector has entered a corrective period of either sideways or downside price action.

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.