As mentioned I do like SCO and if I felt there was a VERY high probability of a significant pullback I'd close the position just because it would be opportunity cost and then look for a new entry, I do see intraday charts suggesting some downside or a pullback, but they aren't enough to cross that threshold for me.
I think if we do get a pullback in SCO, it is VERY likely to make for a nice add to or new trading position, it IS NOT a long term position however, I have too much respect for USO's longer charts to think otherwise.
SCO...
Remember our concept regarding high volume especially as it relates to key candlestick days like the bearish Shooting Star to the far left on huge churning volume, the body of the candle shows that price barely moved from the open to the close, but intraday higher prices were rejected on heavy churning. To the far right we have a small star that is right at or under the channel, depending on how you draw the trendlines, but the large volume even at the bottom of the channel is a bullish hint for that candle and since, as I had written to a few members, it looks like it may be going for a Channel Buster which would also probably be a counter trend rally and those usually have quite a bit of momentum.
On an intraday basis you can see the increased volume specifically at the lower channel, it is a likely Channel Buster which also means that when it's done, it should set up a nice trade in the opposite direction.
Remember this is SCO, 2x short crude.
As for SCO's Trend Channel and RSI (I like to use the 6 period as its more sensitive, many conventional indicators I use very long periods to reveal trends like 26/52/9 for MACD or 50-100 period for Stochastics, but with RSI (Wilders, not the Relative Strength Index), I like 6 period. You can see at the top of the SCO run RSI was divergent and has remained below zero actually 50, which is one of the 3 key components in our X-Over Screen to avoid false/whiplash crossover signals. Now we also have a positive RSI divegrence and a move above 50 in RSI as the Trend Channel is so very close to stopping out the downtrend with a stop on a closing basis at $29.09.
This is what I mentioned in the earlier SCO post as far as intraday highs possibly being reached as the 1 min chart is going negative here, however a 1 min chart in and of itself doesn't scare me out of a position, but if I was trading a more leveraged asset like calls, I'd probably want to take the gains (or close out the position) as it's likely there's little left for today other than profit eating theta decay (time decay).
The 30 min chart is positive too, I just think the 15 min chart shows the trend better overall from top to bottom with a leading negative divergence as SCO makes its highs and a larger relative positive then leading positive (as is often the progression with larger divergences) in SCO.
Remember the concept or analogy of "How much gas is in the tank", the larger duration a divegrence or base/top, the more it can support the move expected to materialize from the base (in this case). While we can have strong positives like we did Monday intraday, it's only a day thus not much gas in the tank, however here we have nearly a month, this can support a significant move which would be on par with a counter trend rally.
Remember I use yellow to denote a head fake move, they are there a lot more often than you think, we just fail to recognize them, also note that it was one of the last things to occur before a reversal as is often the case.
5 min SCO also has a decent positive divegrence in its own right, again note the little Island bottom head fake move that hits stops, remember the increased volume at that area, a large part of that is a stop hunt which allows smart money to pick up a lot of shares very quickly and no one ever seems to question who took the other side of the trade.
This 2 min chart is actually leading positive in a big way, but I wanted to scale it to price so you could see the confirmation,
this is one of the main reasons I haven't closed the SCO long, a 1 min divegrence is one thing, if it were through 5 min charts that would be another. It still may fill the gap, but I don't have enough objective evidence to close the position.
USO
Note the daily USO Trend Channel with a stop on a closing basis below $36.45 as well as the same volume concept and RSI divegrence.
USO's 60 min chart shows a large positive divegrence we have been tracking for months, I think it has a lot more upside, but for now it did go negative recently along the lines of a counter trend move. Also note the two head fake areas,
both were just before a reversal in trend and this is why head fake moves are so useful in acting as timing flags as well as getting the best entry and lowest risk although they are very hard to enter emotionally at the time, you just have to study a lot of charts and see that the probabilities are with you as long as you have an edge to distinguish a head fake move from a real break down or breakout, the 3C positive divergences made it clear these were head fake moves and therefore tough, but awesome entries.
Although there are other negative USO charts, I didn't want 25 charts, I skipped ahead to 5 min which is also showing a head fake move with a negative divergence to confirm it making this an ideal area to short USO.
While the SCO 1 min chart and the lack of a negative on a 2 min chart give me some comfort in holding the position, USO's 3 min positive is the reason I have to keep the gap fill scenario in mind,
this also means that if that happens, there's a nice entry for those who may like the trade but didn't have an opportunity to get involved.
As I'm big on pointing out, note the reversal process for the timeframe, it looks like it should, there's a difference between a reversal process which is what we see 90% of the time and a reversal event which is much less frequent, usually "V" shaped reversal events are on information that Wall St. had no way to discount, take Putin's 180 about face Tuesday morning although Monday's charts seem to make clear someone knew about this, however it is these kinds of events that cause reversal events and they are fairly rare.
Crude Futures
Here we have a 1 min positive in /CL (Crude futures), it's really not enough to swing me on the very short term, however what is more important to me considering the size of the SCO positive divegrence is the 60 min Crude futures...
This in line uptrend going negative and leading negative is why I think SCO or USO short is a trade that will last more than just a few days or a week or so, I think it can be a trade that last several weeks with some breaks along the way, therefore I value the position and don't want to give it up based on some 1-3 minute charts when the potential and probabilities of the position are so appealing.
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