XLI is oversold and due for a short-term bounce.

You've got your first trade today. XLI, the industrial sector ETF. industrial sector under a little bit of pressure over the last month here. How are you looking at industrials right now?

As a contrarian, this is uh the first trade here is very much largely predicated on what the Fed is going to do. You would think it would just maybe be some oil prices is putting, you know, the industrials under some pressure.

I think it goes far deeper than that. I think the US dollar is also going to play a large role in this as well as the bond market uh later in today's session. But I'm a huge contrarian in here.

What we're seeing in the XLI, if we take a look at the chart, which I'm going to in uh in just a moment, um is just wildly oversold conditions. I mean, this has had some fierce sellside activity.

One of the things that that I look at, and I'm very much a quantitative trader. I look at what's termed expected move, and that is what the option market depicts week-toeek risk to be.

And in five, count them, five consecutive weeks, the XLI has actually exceeded hit or exceeded its lower edge of expected move. That's how the option market again is looking at risk.

So if it says it's supposed to move three bucks, it's moving beyond that or or that full $3 and five consecutive weeks is statistically wild oversold conditions. I'm looking for just a brief, okay, but violent move back to the upside.

As such, I'm going to take an O 16 O 16 expiration. I'm going to buy the 172 calls, 172 calls, and sell the 177 calls against him. It's a $5 wide call spread that I'm purchasing.

It's very slightly out of the money. Looking for uh what we kind of term a a little bit of a rip back to the upside here. Possibly some short covering, possibly some new money coming in in a very very beaten down sector. this uh this $5 wide spread is trading right now at about a$130 debit.

All right, Rick. So, as we look at the technicals here for XLI, are you seeing the potential over the next month for a snapback rally? You know, one of the things about technical analysis that confuses people is uh it's often viewed as trying to be predictive when really we're just identifying key support and resistance levels as potential opportunities.

Regardless of whether you're bullish or bearish, that's up to you as a trader. So, that being said, it is a pretty compelling area we find ourselves at right now because we had a repeated floor right around here near 169.

And that's roughly where we've bottomed out now. So, we have um at the bottom of a rather extended downside channel that was formed shortly after our highs, we find ourselves sitting now at a repeated floor of support.

So, if we were to get some kind of uh uh bounce, it would be quite interesting to see if we can start to make our way above the boundary of our channel here. All I can't help but notice as well that today's candle is a harami type candle.

A smaller green candle's real body completely contained within the previous days. Larger red candles real body. Real body being the distance between the open and the close. So the opposite of an engulfing candle suggesting a a shift in momentum.

So in this case it could be a sign that downside momentum is starting to uh wayne here. So we can also see if we were to move lower though the gap would be filled near 165. It has not been filled yet here.

Um so uh that would be another area to watch to the downside potentially to the upside 172 would be another gap filled 176 would be another uh uh high point that we had during our decline.

So here uh we can look at our moving averages here and uh giving us again another piece of interesting evidence here. Our long-term 251day exponential moving average is at 16815.

That's our orange line here. That's around where we've hit our lows repeatedly here. So the longer term a moving average the more significant it it is as a source of potential support here.

So we have uh now have a confluence here of our moving average and our previous extreme lows that we saw. RSI managing to stay above the uh uh 30 line there uh that represents the oversold area.

So also seeing a little bit of of bullish divergence here. Price making repeated lower closes. RSI staying more consistent and being on the verge of breaking above its own downward sloping trend line there.

Um so again as well when we look at our volume profile study we have a node here between 163 to 166 to the downside. To the upside the heavy trading comes in between 172 to 176.

All right. And right now as we look uh at the XLI the industrial sector ETF we're at 1718. And again, this is short-term play here just over the next month. Looking for a move to the upside.