USO Position Update

I'm not ready to add to the USO position entered Friday, Trade Idea: USO (Speculative Options) Jan $22 Calls. To bring this up any further than a speculative position would require significantly more evidence.

However, interestingly, just as last night's Futures start to the new week, Sunday Night Futures and the Week Ahead, indicated, there were sharpening positive divergences which played out in the overnight session with some nice gains, however during the cash session the 3C concept of picking up where you left off took over and those gains have dissipated, but it doesn't mean the original signals that remain aren't still significant for an upside move.

Just like any other asset moving from one stage (in this case stage 4 decline) to another, there's always a change in character and often by way of volatility, that is obvious when looking at USO's Trend Channel chart.

 Using the daily Trend Channel on USO, you can see the change in price Rate of Change, this is no different than a channel buster such as the BABA channel buster we called on a strong day up with the next day beginning the pullback exactly to where we forecast weeks earlier.

While BABA's specific head fake move is characterized as a "Channel Buster", remove the channel and watch the rate of change in price and you set the same thing as USO above. An increased ROC in price which serves as a warning between all 4 cycles just before a transition, but especially between cycle 2 (Mark-Up and cycle 3 (Distribution/Top) and cycle 4 (decline) and Cycle 1, Base/Accumulation.

You'll notice there's an increased ROC in price just before an transition to the next cycle, for BABA that was to stage 3 top/pullback and we forecasted a move below the channel as of the first post at #1 with our target at #3.

If we take away the actual,Channel of the "Channel Buster Concept", we still end up with an increased ROC of price to the upside that "seems" bullish, but just as our post at #1, the very next day the pullback started, breaking the channel to the downside for the first time in months.

USO is no different, again...

Again, take away the Trend Channel and since the gap down (commonly an exhaustion gap), the rate of change picks up, just like BABA's seemingly bullish ROC of price was actually a warning, USO's seemingly bearish price ROC is actually a warning.

 As I said last week, Do not make the mostake of thinking this is a change of trned, the 2 hour 3C chart of USO is overwhelinmgingly negative. To the left at the orange arrow are divgerences that would normally stand out and scream on this chart, but to the right at the red arrow we have a divegrence so big it dwarfes the normal ones and makes them look out of proportion next to its immense size. 

As I said, this is no change in trend, but it could lead to an immense short squeeze bounce that calls will benefit hugely from.

USO's increased negative 5 min divegrence at the exhaustion gap area followed by a positive divegrence.

The 2 min USO chart positive in the same area.

And the timing, 1 min chart in line for all of the downtrend now showing a positive divegrence, something certainly seems to be changing near term for USO.

As for the CL/Oil futures (Brent)...

 Overnight we can see some sharp Smash Crash to the upside on huge volume for the overnight session around 9:23 p.m. last night and another following. Look at the volume, someone was buying in size, apparently trying to create a noticeable price move. You can see midnight and the 3 a.m. (EDT) European open where the 3C divegrence has already faded in to a leading negative divegrence suggesting lower prices ahead shortly...

And from the same European open, just after the divergence of the last chart, Crude Futures fell until the US open when they started to show positive divergences againn.

It would seem we have a decent position here, but as I said, before adding to it, I want more evidence that this is a stronger trend to move further and one that deserves more trust as the overwhelming highest probability charts like the 2 hour above are clearly negative and in line with the entire trend lower.