USO Update

My USO calls are now just above a 10% gain, I'll be holding them a bit longer although 10% isn't anything to sneeze at for several days of trade.

By now you are probably grasping my use of options; when I was trading full time for a living with no back up income, I got hooked on options through some very big gains, I traded them just like the majority of retail trades them and eventually lost an account. Options are set up to take your money, from the moment you enter an options trade you have the premium working against you, you have time decay working against you and you have the expiration which as we have seen numerous times, always seems to get pinned putting you at a loss on expiration. So I now use options for extra leverage in a trade set up that I like, but may otherwise not be worth the risk:reward ratio in a pure equity long position. For instance, USO is up 1.5% today, not bad, but not 10% either. I want to get out of my options trade as soon as I can to avoid losing on the time decay and I prefer to NEVER hold them through expiration. I often pay up and go out a month or so further then most and I often pay up and buy slightly in the money. I don't have statistics to validate that strategy, but considering about 90% of options will expire worthless, thus far it's worked out pretty well for me in what has been an otherwise very choppy and very volatile market over the last month or so. One other nice thing about options is you can define your risk. My positions (you may have noticed by the close out position I post) are generally about 5% of portfolio value before margin. If I'm looking at what I believe will be a longer term trade, I'll go out maybe 2 months (depending on where we are compared to the next expiration) and in those cases, I'll generally have my largest position at 10% of portfolio, which I consider to be pretty aggressive. Again, I want to close the position as quickly as I can once I get the gain under my belt and then reposition the next contract on a countertrend move.

In any case, here's USO as of now. To be honest, the EIA report this morning showed a slight build, not as big as last week's, but it wasn't a draw. It seems to me that USO is moving because an accumulation cycle was set in to motion and smart money rarely takes a position and then lets it fail, so my guess is USO is not moving so much on the EIA report, although I still do not know what market consensus was (perhaps the 2 mm build was below consensus).

 Since the last update, USO has broken out of the triangle I mentioned, it is now close to some resistance, I don't expect all of the potential gains to come in 1 day so a consolidation in the area wouldn't surprise me and probably wouldn't cause me to close the position that was set up days before the USO move based on the 3C charts.

 The 15 min chart is impressive and has the potential for some decent gains in USO.

 Thus far the 5 min chart is exactly in line (confirmation of the move up), not only on an intraday basis, but relative compared to 3C's position to the left relative to price's relative position at about the same level.

 Short term 1 min shows a little bit of a negative divergence, I would suspect this will be the basis for a consolidation, but again, 1 min charts can shift rather quickly, but for now, that's my working theory.

As to the target, I would expect USO to easily break above the first resistance level, although we may see some consolidation before that happens. The second yellow area would be what I would expect as a minimum target and knowing how the market is pendulum-like, swinging further then anticipated both ways, a move above the red trendline wouldn't surprise me either.