Trade Idea (Short term Call/Options) USO

Last week I posted an Energy update and it wasn't favorable, but it was the entire Energy sector, not specifically oil and it was a longer term look.

As we have been tracking $USD strength over the last 12 weeks in which it has had consecutive weekly gains, we recently said there were some negatives in the $USD and it was likely to come down, we also expected a bounce which we got Thursday and Friday, this may not seem relevant, but just remember the $USD Legacy Arbitrage correlation for $USD denominated assets.

I'm usually not a fan of USO trades any way, I'm not crazy about the leveraged ETF/ETN options, but in this case I'm looking at a November 22nd expiration, $32 call position. This is a FUNNY Money trade, money I can afford to lose so it is VERY speculative.

I suspect the $USD is about to see some weakness again, here's why and it should benefit USO.

 The $USDX 60 min chart is where I'm seeing longer term damage, the 12 consecutive weeks of gains didn't have this kind of negative divegrence and as soon as it did, the $USD saw some serious downside.

Officially we still have some positive divergences here like 15 min above in $USDX, however as you know, new divergences start on the earliest timeframes and as they grow stronger, work to the longer timeframes so ...

 The 5 min $USDX leading negative, should start migrating to the longer timeframes, suggesting $USD weakness in the near term which "should" help crude as it is a $USD denominated asset, incidentally stocks are as well.

This is the daily chart of USO's top, to the far right is what I'm interested in. There can surely be a larger reversal process, but that's part of the reason I went with a good month+ on the expiration, November 22nd.

Note the gap (orange), this is where positive divergences start picking up, not huge trend changers, but a counter trend rally can be a very sharp, very impressive thing. Also note the last 2-day's candlesticks, a Doji Star bullish reversal and a Star bullish reversal today, taken together form a Tweezer Bottom Bullish reversal, so while this may be a shorter term trade, I still want that longer expiration.

 The 30 min showing a negative sending USO lower and a positive forming right around the time of the gap, which is often associated with short term capitulation or "Exhaustion". Volume was also high on the gap candles, typical of short term exhaustion moves.

The 10 min chart has a nice positive building, again a lot of it is around the gap down.

As well as the 5 min chart so there's good multiple timeframe confirmation.

Intraday I suspect USO makes a move lower, but considering the expiration on the calls and the very speculative nature, I'm not too worried about it, but if you want to look for a lower move in price as part of your risk management or deciding if the trade is worth it for you, maybe that move lower tips the scales, I think it's probable, I'm just more focussed on larger positions and want to put my energy there considering this is a speculative position.

SO I'm going with November 22nd expiration with a strike of $22, Calls of course.