USO/SCO Update

"It's not the news, it's the market's reaction to the news"

And in that one statement, USO has been performing incredibly considering the news, of course a stronger dollar and a weaker China don't hurt either. In any case, some of our members took the intraday USO trade yesterday and some held for a swing move as well as longer term positions, which I still have Crude shorts in the Model Portfolio. Here's the USO/SCO update.

 As for the intraday trade (short) on USO from yesterday, here's the area it was taken, even with the late day ramp it closed at a gain and today added to that gain.

 Very short term it looks like a bounce or consolidation is possible here in USO on a 2 min chart.

 The 5 min chart remains in line and has no positive divergence.

 The 15 min chart seems to show a cycle pretty well from accumulation in white to distribution in red and a new leading negative divergence which looks pretty good for longer term trades/shorts on crude.

 The hourly chart confirms this negative outlook thus far.

 And another longer term daily cycle in USO from accumulation in white, confirmation in green and the first negative divergence of the entire trend in red. If we get a decline from here, this will be a 4 stage completed cycle: accumulation, mark up, distribution, decline.

 Here's the daily trend channel which is turning lateral from up and very lose to breaking the uptrend represented by the channel which is a custom indicator I wrote that considers the recent volatility in formulating the channel to show any changes of character. A break below the channel represents a 2 standard deviation change of character, which has been successful for a long time in identifying trend reversals.

 For short term traders from yesterday's short idea, if you are still holding, you might consider a 50 bar average on a 5 min chart, it's fairly tight and will allow you to keep the most profit, but may not be wide enough to allow for a consolidation or intraday counter trend move, in that case you can widen the stop to a 10 or 15 min chart, depending on how much risk you are comfortable with.

 SCO shows one of those high volume/Doji candle reversals that are quite common. This is what is in the model portfolio as a leveraged short on USO.

 The 5 min chart appears to show 2 areas of accumulation, the second being stronger then the first and I explained why accumulation stops when prices rise, as there is a level in which orders are expected to be filled for customers by market makers and other middle men.

 The 15 min chart shows the same thing, 2 areas with the second being stronger then the first and is essentially the opposite of what we see in USO so it looks like pretty good confirmation.

 The 30 min chart looks even more bullish for SCO and the accumulation area is marked to the right, at least my best guess.

Even the hourly chart comes to the same conclusions and is now leading positive in the SCO/USO short.

 I don't like the geopolitical events, but SCO has responded well to them, furthermore 3C looks pretty darn good so for now, I'm sticking with my SCO position/short crude.