While I'm waiting for a.m. (Monday especially) to burn off, might as well look at Oil.
I was considering a short term long position in USO as a counter trend trade, but I think until I have a better feel for the overall market, I'll pass on anything counter trend that's not jumping off the chart for now.
I'll show you what I liked/like about USO or Brent Crude futures short, why I think in the near term they are better off closed and why and what would cause me to enter them again.
Had I been around Friday to close the USO put position, it would have done pretty well. Today, closing these is out of an abundance of caution and possibly better use of assets (opportunity cost).
USO
USO's longer term picture (60 min chart), despite what's happening in MENA, is showing clear distribution on the 60 min chart, that's the bigger picture, but just like the movement of the planets in the solar system is the big picture, planets like Earth still wobble within that larger orbit.
The USO 30 min chart has good confirmation, going from in line with the move up to negative at the top which is around the area we entered these positions. Judging by these two charts, USO still looks like a good short, DTO a good long and indeed if you are playing them longer term (at least DTO, not USO puts) then that may be the case, but again, it feels like there may be a better opportunity unfolding while this one takes a breather.
Near term trade (or the wobble) on a 5 min USOP chart , shows the negative divergence at the top, but also shows a shorter positive divergence developing as USO has lost ground from the recent highs.
Light Sweet Crude Futures
Although these have some differences in performance (WTI vs LSC) , the trend has been essentially the same and gives some confirmation of both the shorter and longer term picture.
The 30 min chart of Light Sweet Crude futures shows 3C clearly negative at the top, but in the recent decline (first leg), there's been a positive divergence forming in to the loss of momentum and what looks like a reversal process under way in price.
I believe this is just a normal counter-trend wobble, even though the new trend is very young, so I do envision entering USO short again in the not too distant future. As far as trying to play a bounce, right now I wouldn't, but if the signals really start jumping off the chart, I'd consider it.
The CL futures (4 hour) make the 3C trend VERY clear in removing the shorter term noise, I'd say that leading negative divergence is about as clear as you get as price was rising.
This chart represents the big picture in oil.
The CL (Light Sweet Crude futures) 15 min chart (showing the near term action with more detail) shows what is not only a pretty clear price pattern (loss of momentum and a typical reversal "process"), but also a pretty clear 3C positive divergence building.
In my view the edge is no longer with the short side in near term trade, but taken with the larger picture, there's a clear position (short oil) setting up, a trade that looks like it has very good probabilities of coming to us and giving us a low risk, high probability entry.
I'd definitely keep oil on the radar and set some upside price alerts/triggers to take a closer look at some better entries.
The USO put should have been closed Friday on downside momentum , but as I was fishing, the fill of $1.15 gives the position a P/L of break-even.
The DTO equity long position fill of $33.48 leaves a slight loss, again this was better closed last week, with a loss of -0.01%.
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