Yesterday morning's USO update started with this,
" some long lower wick candlesticks suggesting a reversal to the upside-this gives no target, just a reversal. In green, the most common place for a bounce to move to, the lower end of the channel or "kissing the channel good bye"."
That's exactly what happened...
In Oil related news, A Saudi official has said there were no acts of sabotage on pipelines in the country, following reports from Iranian state press yesterday claiming an explosion on a key pipeline.
Here's USO on a daily chart, yesterday's high volume and long upper wick on the price candle was not a bullish development.
As I pointed out late yesterday, USO kissed the channel, all that remained to see was if it was a kiss "Good-bye" and this morning it is looking that way.
USO will have an even harder time considering the Euro weakness and dollar strength.
The Euro on some bad economic data and events in the EU overnight (I'll get to them later). As you can see, the Euro has lost a lot of ground since yesterday's close and is struggling to hold on to $1.32
The Dollar is seeing strength, putting pressure on commodities like oil.
The 30 min 3C chart registered a negative divergence at yesterday's highs, so it was a strong divergence and strong underlying selling.
The 15 min chart confirms the same, I'm actually surprised to see such a strong negative divergence on a 30 min chart so quickly.
The 1 min chart seems to show that there's some intraday accumulation, my guess would be to try to fill today' gap and that is where the potential trade is.
Should USO fill this gap as is common practice, it would make for an interesting short entry with a stop nearby at yesterday's highs. Again I would set some alerts. I'll be looking for this trade.
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