USO

This is the trade set up in USO which we have been patient with because I think it's a worthwhile trade, everything we'd want to see happen has happened.

This is the trade set up, first there was a USO short as you can see at the top of the channel, but then we started to see a bottoming process play out and one large enough to shakeout a lot of shorts and create a momentum squeeze.


On Friday I said...

"As posted last week, the Iran/Saudi conflict/capture of two Saudi fishing vessels in Iranian waters right after the nuclear deal over last weekend, sent crude below the basing range and I thought that this would be short lived as a knee jerk reaction.

In any case, I was looking for momentum to pick up at $33.50 and even suggested a limit order there which I never use."

Here's what happened next as the move did prove to be a knee jerk move and possibly the news was used to also create a head fake/shakeout below a well defined range of support (the base).

Note the shakeout/knee jerk created the same psychological candlestick as a hammer on increased volume making it highly probable as a reversal candle which it was, the move above $33.50 (small red trendline) did see momentum pick up on the upside.

One of the ways we determine whether it's a head fake or the real thing is whether there's accumulation or confirmation, this is the 2 min chart the very next day.

This tells us even before the gap up that probabilities are for a reversal as the lows are accumulated and there's plenty of volume or supply to do so.

 In fact, loook at the leading positive divegrence in Crude Futures on the shakeout move, we had not had a head fake move previous to this and judging by the positive leading divergence, I think the Iran/Saudi dust-up was used as cover for a shakeout judging by the amount of accumulation on the move.

I think we are not only on track, but now with a head fake move in place which is something we typically see just before a reversal (to the upside) , we are probably right on the edge of a move higher. I'd consider anywhere within the white box to be an excellent entry and I think we head toward the $38.50 level for starters on the first leg.