USO Update

***See Update at the bottom*****


A lot of emails this a.m.  about USO. So Friday my thinking was there was time and space in the price pattern for USO to make 1 more run at the lower range, that's what we saw this a.m. In an update this a.m. I warned to be aware of the possibility/probability of a shakeout to knock out longs if USO is truly going to run higher.

 Remember that it's important to view support and resistace in terms of "areas" and not exact numbers as so many traders do. Once an area of support was established on 5/12, everyone drew the same trendline and the subsequent dips on 5/17 and 5/20 both found support, but in the area, not at the exact price level, this allows them to shake out traders and create a snowball effect, after each breach of "exact support" we saw the snowball effect with fast price runs up to the resistance area of the range. That's why I warned you about this earlier today.

 Sure enough, USO did what it's been doing. Look at the red volume pick up at the break of "exact support". Also on Friday, look at the buy side volume pickup on the slightest break above "exact resistance".

So we have 1 positive divergence on the 1 min chart, enough to move USO back above the trendline, but this is not what I'm looking for, I want to see something much more definitive. For the purposes of the trade, this is still a rather low risk area assuming you don't use that low risk to buy too big of a position.  I don't personally mind picking up a few shares here, but before I would put out a solid call on the buy side, I want to see a more positive looking environment.

So far USO has behaved pretty much as expected which can lead to a false sense of confidence. It's good that the analysis has been pretty accurate and hopefully we remain on the right track, but we need to look at this with fresh eyes every time and not let biases interfere with observation.

***Update-By the way, to launch a real breakout to the upside I would expect a deeper pullback then what we see now.