This Energy ETF Just May Have the Gas for a Breakout

Asia picked up the torch on Monday and the US followed suit. Still, a ton of economic data is headed in our direction this week, beginning with Consumer Confidence here on Tuesday along with the Job Openings and Labor Turnover Survey (JOLTS) report and the latest on housing.

While I've seen higher rates impact housing resales in many areas, new home builders continue to buy down rates for the short term to help buyers who may be priced out of the market with the average mortgage rate above 7%.

Those folks with 3% mortgage rates may be trapped in their homes whether they like it or not. Cash buyers still have power (they always do), but if you ultimately need a mortgage on your next property your borrowing power essentially has been cut in half when comparing 3% rates to 7% rates.

At some point soon, I think we'll get a screeching slowdown in new home sales, existing home sales and the housing price index. I am not expecting a crash, but we've been running too hot for too long now.

Later this week, we'll get updates on second-quarter GDP, more housing data via mortgage applications, jobless claims and Chicago PMI, and we'll end the week with August Nonfarm payrolls, the unemployment rate and ISM. You can add in average hourly earnings and construction spending.

Whether you want it or not, it's an all-you-can-eat buffet of economic data.

On the trading side, I'm keying on the Energy Select Sector SPDR ETF (XLE) , which is a holding of the Action Alerts PLUS portfolio, for a possible breakout. A bullish flag in the form of a pennant has been created over the past few weeks. With the ETF well above its 21-day exponential moving average (EMA), longer resistance is out of the way.

Yesterday, the 5-day EMA pushed up against the 10-day EMA. A cross of the 5-day above the 10-day, along with a close over $89, would put this ETF into buy territory. A close over $90 would put it into a solid breakout position with a target of $94.

I would use the support line of the pennant as a stop. Currently, that sits at $86. If XLE breaks above $90, I would consider pushing the stop to the 21-day EMA as a trailing level that should move higher, even if XLE stalls above $90 or retraces a bit.

(XLE is a holding in TheStreet's Action Alerts PLUS portfolio. Want to be alerted before the portfolio buys or sells stocks? Learn more now.)

At the time of publication, Byrne had no positions in the stocks mentioned.

One looks primed for a possible squeeze while the other is on the brink of a breakout.

Why are the healthcare and utilities ETFs not going up now? Let's take a deep dive.

Much of the cryptocurrency moves - up and down - have been driven by emotion.

There is no reason to rush to put significant capital to work, but good opportunities should continue to develop if the job market is cooling off

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