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The shares price of Xcite Energy (LSE:XEL), though in an overall downward trend, is giving buyers a unique opportunity to buy very cheap and ride their profits to the sky. While it is good to follow the line of the least resistance, one should know when the least resistance would become the greatest resistance. Normally, a market bias shows incongruence in accumulation and distribution. In the case of the price on the company in question here, accumulation is becoming stronger than distribution. It is no longer ideal to short this market as the technical analysis below shows. You could be sliced up by the market that threatens to break down, but which does not.
Technical Forecast
This stock (LSE:XEL) has largely been bearish. Looking at the chart, we see that the market has been in a downtrend. However, the price has recently been consolidating to the upside as the supply zones below the price are getting more and more effective. Technically, Trendlines and Relative Strength Index (RSI) period 14 are used. The trendlines confirm that the price is edging upwards as it consolidates. The upper trendline is currently acting as a kind of resistance level. On August 20,2012, a distinct bullish candle attempted to break it to the upside, but the attempt was checked as the price failed to close above it. Once a candle closes above the upper trendline, it means the days of the bearish pull are numbered. The RSI 14 has gone above levels 50 and 60 respectively – now targeting the level 70. The RSI itself is giving a ‘buy’ signal which would be confirmed once the price closes above the upper trendline.
The more objective your analysis is, the more effective it will be. The price is currently 84, the nearest supply zones are 85.00 and 85.50 (the zones that could be under bullish attack any moment), whereas the effective demand zones are 84.00 and 83.50. There would be some volatility as bears continue to fight a possibly losing battle against bulls.
Conclusion: This is one of many trading setups that tend to be traded by Smart Money. A speculator who has witnessed a lot of irrationality in the markets would be wary of another irrationality, more than a speculator who has not witnessed such. It is merely a matter of waiting for the best opportunity. Patient buyers prefer to wait for unique opportunities in the markets, and then they do the right thing at the right time (as neophytes languish). The race the dog has run for many years is a leisurely gait for the horse.
This article is ended with the quote below:
“To understand any market, you have to know the longer-term demand and supply.” – D.R. Barton, Jr.
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