USO Update

 The Euro in white (used as a proxy for the $USD as it has a correlated relationship with oil whereas the $USD has an inverse correlation making divergences a bit harder to see-the EUR/USD pair accounts for 50% of the Dollar Index so it is by far the strongest correlation making the Euro suitable for comparisons). Intraday on a 5 min chart we see some strength in the Euro vs USO which seems to be leading USO higher intraday.

 The 1 min 3C chart shows a relative positive divergence at the white arrow and a leading positive divergence (which is the strongest divergence) at the white box. This suggests some intraday strength is building. New divergences almost always start on the shortest timeframe (1 min) and if they are strong enough, they will migrate to the longer time frames and become more powerful divergences.

 On a 2 min chart of USO you can see the relative positive divergence, there isn't a leading divergence yet because the 1 min strength is just starting to migrate to the 2 min chart.

 The 5 min chart isn't showing anything yet because the 2 min divergence is not strong enough (yet) to migrate to the 5 min chart which is much more influential then the 1 or 2 min charts.

Here's the USO set up we have been watching and trading on and off. First we had a very clear channel and in the first yellow box, a Channel Buster, which is a head fake move outside the channel, it looks strong initially, but they almost always fail as this one did. As I pointed out last week, it is common for these patterns to bounce and "kiss the channel goodbye" which USO did the next day, that also happened on a bearish shooting star candlestick and large volume suggesting bearish churning. At the red arrow, you can see a bullish candle with a longer lower wick and heavy volume, as I pointed out earlier today, this is often a reversal signal, it carries no implied target, it just tells us the current trend will see a reversal of some sort.

I'm guessing USO will loo to fill the gap from the downside move last Thursday, which is highlighted in orange. Once in that area, if we have negative divergences, it should make for a good short set up, high probability/low risk.