USO Update

USO was another Follow-up/ Trade idea from last Friday , I opened a 1/2 size position in July $30 Calls...


"I'd love to sit and watch USO for a better entry, but I don't have that luxury, so I'll be entering a speculative position"


The last update from Friday started like this...


"This update from June 20 speculated that the descending triangle (of which we have been seeing a LOT lately) was setting up a bear trap.

From the update:

"This recent descending wedge is a pattern we've been seeing a lot lately, there have been some good head fake moves off these. Today we saw the downside move that technical traders expect from the price pattern, so the question is, is it setting up  bear trap?"


In any case, as you'll see, USO's drop today didn't do much damage, in fact it ironically only made a new low by 1 CENT! This is another reason I view support and resistance as levels or areas rather than EXACT points, I'm guessing that one cent made a world of difference as far as taking out stops/triggering new short orders. It appears to me that USO is seeing some afternoon lift from the negative divergence I posted earlier in the $USD, when the dollar falls, oil generally appreciates in price and vice-versa.

 This was the original idea-a bear flag/pennant that had already broken below support of the consolidation, triggering a flood of orders (likely almost all short orders because of the implications of the technical price pattern). Today's low was 1 cent below last Thursday's low, so although it seems like a very bearish move in USO today, it has only lost 1 cent from the last 3 day's support. The red arrows show how Technical traders are taught to interpret the price pattern, this is why I suspected a bear trap.

 Look at the volume as the bearish consolidation pattern was broken.

 Today's intraday action is actually bullish looking, very similar to a rounding bottom.

$USD 1 min trend and intraday leading negative divergence.

 $USD 3 min intraday leading negative divergence today as well as a relative negative divergence.

Also the 5 min chart seen earlier that shows no confirmation of the $USD's gap up with plenty of downside confirmation (at the green arrow).


I'll be sticking it out with the USO calls, I haven't made a decision as to whether I may add to them or not. I'd like to see how the market develops a bit more and decide where capital would be best allocated.