USO Update

USO is just not my trade right now, I see probabilities there and there may even be some short term upside probabilities, but it's just not the place I would chose to put money right now, at least not much; I think there are better places to put money with better probabilities both on the long and short side.


USO is also a good example of how well 3C worked even in an environment when QE3 was announced (oil typically did very well under QE programs, 3C was saying oil didn't look good around the time and USO followed 3C.

 First on a daily chart there's a strange price pattern, I'd like to call it some kind of bear flag or pennant, but the fact is the flag area is a "bullish" ascending triangle and makes ZERO sense where it is, furthermore volume does not confirm the consolidation aspect of any kind of flag or consolidation in that area. I can only assume this is a random price pattern that doesn't mean too much.

We also see a break below the pattern, in the VERY short term this "may" lead to an upside bounce above resistance, but I still don't like the probabilities compared to other assets.

 4 hour USO has shown several negative divergences and a positive at the June lows, the Sept. QE3 announcement was the last major negative divergence in USO and you know what has happened since then.

 Here's the QE3 negative divergence in USO on a 2 hour chart, the 3C signal right now really is, "There is no signal".

 On a 15 min chart 3C is negative at the Sept 13/14 QE3 announcement and knee jerk reaction, remember what I say about F_E_D inspired knee jerk reactions, "They are almost always wrong".

USO remains in a leading negative divergence, with the 15 min chart this negative it is hard to justify any long position in USO, as far as short positions, we'll get to that.

 A number of head fake moves in USO all fail on a leading negative divergence, the slight 2 min positive divergence is why I'm not crazy about shorting USO either here, perhaps it develops more and opens a better opportunity soon.

 The same on the 3 min chart.

And the positive only reaches to the 5 min chart, it's not enough for me to go long with such an ugly 15 min chart and with the positives in place, I don't want to short it here either.

If you are interested in a USO position, I'd give it some more time to develop, maybe a short on a move above $35 or so if the signals are there.