USO Update

Our last USO update there was a bear flag that I said would resolve to the downside, but not before technical traders are head-faked with an upside breakout, USO did that and headed lower yesterday. I still remain bullish on USO and view recent acton as plain old volatility with no special importance on the intermediate outlook for USO.

 Here's the bear flag I mentioned in red, the upside head fake in white and the downside resolution, which I thought would carry USO lower, until I recently took another look at the daly chart.

 It appears that a bull flag has formed on the daly chart, this would be bullish and fit well with my intermediate term bullish bias toward USO.

 Looking at the 15 min hart, note distribution toward the top of the flag's range and accumulation near the bottom.

 Again, distribution near the top of the flag and strong accumulation yesterday near the bottom of the flag, this looks like typical market maker, or rather in this case, specialist manipulation as they fill an order for an institutional client. The client has an average position target, when pries stray too far from that target, the specialist lets out some supply and works the bid/ask lower.

 Even today we see what appears to be accumulation near the lows of the day.

As a general rule, flags and other consolidation patterns typically see 5 points of contact with support/resistance before a breakout, if you look at the white arrows, we are at 5 points of contact. Being a popular technical formation, there's the chance of an HFT manipulation with a false break, probably to the downside, that's just a possibility to be aware of and if we see it, it may be an excellent place to start a long position.