"As you can see from looking at the charts, the XLE [energy ETF] has been in a very well-defined downtrend," technical analyst Rich Ross said Tuesday on CNBC's "Trading Nation. " The energy space has fallen 26 percent from its 52-week high as crude has collapsed nearly 50 percent in the same period.
Ross noted that after rallying more than 16 percent from its low in January to its high in May, the XLE ran into resistance at its 200-day moving average, and since has sold off more than 11 percent. "But importantly we've held this very nice area of support here that we've tested four times," said Ross, head of technical analysis at Evercore ISI.
"What we want to do is be a buyer down here at the lower end of the trading range," he said. Ross' chart work shows that each test of that key support, which comes in at $72, has resulted in a rally. And in this instance, Ross believes we could see the XLE as high as $80 in the near term. That's a 7.8 percent rally from current levels.
But with the extreme volatility in the crude oil and energy space, Ross stressed that investors use the support level as a protective stop on the trade.
"Use the $72 support to play for a bounce in the energy space," added Ross.
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