USO Update

Our last update for USO/Crude yesterday was, USO/Oil quick Update which the gist of was,

"This doesn't look like a wide enough base for a true upside trend reversal, but it may be the first rally/bounce in forming a larger "W" type base area."

As for today's update, something looks pretty interesting about USO and I'm leaving the 8/21 USO $17 call position for the time being.
This morning's EIA Crude Inventories saw a draw of -4.2 mn bbl while gasoline demand and refinery operating capacity remained very strong, about 6.2% higher than normal for this time of year.


The charts....

 Starting from a 5min chart this looks like a larger accumulation area, although a bit tepid at first.

 We want to see divergences strengthen and that means migrating to longer term charts which is what we have here on this 15 min USO chart which moved from in line to a leading positive divergence with a lot of it coming in yesterday.

The 30 min chart is showing essentially the same thing, but what's important here is that the divergence has migrated as far out as a 30 min chart in a fairly short period of time.

 Intraday (1 min) we saw a pop in USO and what looks like a consolidation/pullback intraday.

The 2 min chart is still in line intraday which if it stays that way, we are more likely looking at an intraday consolidation of today's gains.

On a daily chart you can see the Star and increased volume which looks like a short term capitulation/selling event which is not surprising given the way the charts above look.

As I said yesterday, although we are in the area (16-ish) that I expect oil will be able to put in a longer term/larger base for a true primary trend reversal (we'll get to that bridge when we cross it), I suspect we may be seeing the first bounce higher that forms a "W" type bottom. It looks to me like there's probably more room to go and especially over the next week or so which is why I'm leaving the USO 8/21 call trade idea open for now.

I'd consider taking a look at USO if you haven't already on any intraday pullback. I'll set some alerts in case we get one.