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BPENER or Bullish Percent Index for the Energy Sector

The BPENER or Energy Bullish Percent Index measures the breadth of the Standard & Poor's energy sector. The BPENER indicator is used by investors to identify potential interim high and low points of the energy sector. If you use stockcharts.com be sure to add a $ to the beginning of the symbol ($BPENER).

For those who wish to understand the BPENER or Bullish Percent Index Calculation please see the end of this article.

How to Use the BPENER

The BPENER is used by many investors who use technical analysis to identify changes in the trend of the energy sector for the period being evaluated. When the Energy Bullish Percent Index gives a reading above 70%, it is considered overbought. Even stronger overbought signals are given when the BPENER Index rises above 80. As sell signal is given when the BEPNER turns down through either 80 or 70.

When the BPENER is below 30% it is considered oversold, with a reading of 20% considered a better signal of an oversold condition. A buy signal is given when the BPENER Index turns up, reversing its down trend.

The trend of the BPENER is most important, as it is proportional to the direction of the energy sector. When the BPENER Index is trending up, so is the energy sector. On the other hand when the energy sector is trending down so is the BPENER. Reversals of the BPENER are important events, as they indicate the energy sector is changing its trend. Investors use the BPENER Index with daily, weekly and monthly periods.

BPENER Example

In the chart of the BPENER Index the 20-day moving average acts as the signal line. The 12-day moving average is an early indicator that can be useful. You can use other moving average time periods as well as exponential moving averages. You might want to experiment with different signals lines to find one that suits your investing style.

When the BPENER crosses down through the 20-day moving average, it signals the trend is changing from up to down. A crossing by the BPENER up through the 20-day moving average gives a signal that the trend in the energy sector is shifting from down to up.

Some investors use a shorter time frame such as the 12-day moving average to give them an earlier warning of a change in the trend of the sector. The decision of which signal line to use depends on your personal risk profile. If you are willing to enter at an earlier point while risking being to early, then using the 12-day moving average might be advisable.

In addition to the moving average signals, other indicators such as the RSI Indicator and the MACD are useful to identify trend turning points.

When the Relative Strength Indicator (RSI) rises above 70 it is an indication that the BPENER is reaching high levels where it will eventually turn down. When it does fall through 70 the RSI gives a sell signal.

An RSI reading below 30 warns investors that the BPENER is at a low point. A buy signal is delivered when it turns up through 30.

When the MACD turns down through its 9-day moving average on the daily chart, it is giving a signal that the BPENER is about to turn down. Moreover, when the MACD shows negative divergence it is a good indication the BPENER Index is about to reverse course and trend down.

When the MACD rises through the 9-day moving average, it is a signal the BPENER is turning up. Positive divergence on the MACD is also a good indication the BPENER Index will rise in the near future.

BPENER or Bullish Percent Index Calculation

To calculate the BPENER Index take each component stock of the sector index and chart it using the point and figure system. The stocks that have a point and figure buy signal are added together. This number is divided by the total number of stocks in the Standard & Poor's energy sector index. Theoretically, a bullish percent chart can span from 0% to 100% where no stock in the index has a  point and figure buy signal or where they all do. This rarely happens, as it tends to oscillate between 70% and 30%.

Fortunately, Stockcharts.com performs the calculations for the BPENER Index for you. You can create custom versions of the BP Index is you one of the premium members of Stockcharts.com. Some of the other charting services also provide this service.


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