Over the past month or so, I’ve been writing about oil…

In February, we checked out Exxon Mobil (XOM). And in March, we’ve looked at the Energy Select Sector SPDR Fund (XLE) and Chevron (CVX).

This sector has fallen off many investors’ radars. But it has outperformed the tech-heavy Nasdaq index this year.

Today, I want to visit another stock in this sector… Cheniere Energy (LNG).

LNG is the U.S.’s largest producer and exporter of liquified natural gas (LNG). Its peak in November represented a massive 575% rally from its March 2020 low.

After retracing from that high, though, let’s check if LNG is setting up to run again…

A Changing Profile

The last leg of LNG’s rally kicked off in early June 2023.

By the time LNG topped out at its all-time high in November (‘A’), it had gained more than 6.5-fold in price since March 2020.

Cheniere Energy (LNG)

Source: e-Signal

LNG’s rally coincided with two common bullish technical signals…

1. The Relative Strength Index (RSI) rebounded from oversold territory (lower grey dashed line) and broke back into the upper half of its range. That’s where it remained throughout the rest of LNG’s rally.

2. The 10-day Moving Average (MA, red line) crossed up over the 50-day MA (blue line), with both MAs then tracking higher.

But this time, a reversal of that pattern saw LNG peak and reverse.

In November, the RSI inverted from overbought territory (upper grey dashed line). It then fell through support (green line). It has remained bearishly in its lower band until recently.

That action also caused the 10-day MA to cross below the 50-day MA, with both MAs then tracking lower.

Then, coming into 2024, we saw a change in the RSI’s profile.

Take another look:

Cheniere Energy (LNG)

Source: e-Signal

Since mid-January, it has been trending higher, making higher lows (lower orange line). But up until recently, it has been unable to break through resistance.

While the RSI rose, though, LNG has been falling, making lower highs and lower lows (upper orange line).

We know that when price and RSI are converging like this, a reversal is often not far away…

In fact, LNG rallied off its low earlier this month. And so far, that move is looking promising.

So what should we look for next?

Acceleration Higher

The RSI tried twice this year (and failed) to break up through resistance before finally succeeding. Now, it is tracking in its upper band (red circle).

But right now, the RSI is still very close to support.

For LNG’s emerging up move to develop into a full rally, the RSI needs to track higher and longer in its upper band.

Additionally, this move has recently put the 10-day MA bullishly above the 50-day MA.

Yet the two MAs are still tracking very closely together.

So we’ll also need to see the 10-day MA accelerate higher and pull the 50-day MA higher with it.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict