USO Update

So far USO has played the part perfectly since our last update

As you can see from the update above, USO had formed a bear flag, whch is a bearish downside contnuation pattern. I warned in the last update,

"Since USO is widely watched and this price pattern is widely followed by technical traders, their bets are going to be for a downside break from the flag, they'll probably be right, but they'll most likely get knocked out of the trade first with an upside head fake breakout of the flag. This will make technical traders think the bear flag has failed and what are you supposed to do on a failed pattern, take the other de of the trade. If this happens (an upside breakout of the flag) and technical traders take the bat, that will likely be the cue that the downside move s about to begin. As of now, that's my opinion of USO. "


Here's the flag and as suspected, here's the upside head fake above the flag, which served as our warning that USO was about to head lower.

While 3C supported the theory, this is plain old Wall Street manipulation of technical traders and their habits.


If the measuring implications of the flag are used to give us an idea of the target it would be around $35.70-$36, but we'll watch developments as they unfold. If you caught that update, you'd have seen everything played out as expected and are probably sitting on a profitable short oil trade right now.


Intermediate term, I still have a bullish bias toward oil and a pullback may offer a welcomed entry for a long position. If nothing else, just remember this as a lesson as to how Wall Street routinely takes advantage of the predictability of technical traders.