USO Update

With our January Call options in USO, I think we have a good position for a short squeeze in USO as a nice base (mentioned yesterday) has formed in USO. While I keep hearing media referring to it as "knife catchers" and "bottom pickers" trying to find a bottom in USO/Oil, I disagree that this is a major trend change, but with the base that's in place which is sturdy for the kind of move I have anticipated, I think it is ripe for a short squeeze.

You saw the charts of $USDX weakening,m with a weaker $USD, dollar denominated assets tend to rise (The $USD Legacy Arbitrage) so I wouldn't be surprised if a dropping dollar contributes to USO upside, short squeeze momentum, but again I stress I do not think this is a trend change and if it were even the start of one, USO would have significant work to do to put in a base/reversal process that could support such a trend change short of OPEC coming out unexpectedly and cutting supply which Kuwait said won't happen , at least not until the June OPEC meeting.

 USO's second bottom in a "W" base. I'd normally expect a lower low here, a stop run before an upside reversal, but that's a probability, not a certainty.

Here's the "W" base and increasing 3C support (2min)

And the same with what looks like an obvious push of USO lower to accumulate at lower prices, the "W" base.

15 min chart's confirmation trend of the downtrend until the gap, which looks to be a short term exhaustion gap.

 The 60 min chart shows how much work would have to be done to even get a respectable base in place for a trend reversal, this is no where near even a start.

Ultimately the 4 hour trend which has some of the strongest distribution over a 3 month period I've seen in just about any asset (someone knew something long ahead of the decline and was acting months in advance) shows that even with a sharp short squeeze off a respectable base for the task, it will amount to little more than a brief pause in the downtrend.

A second trade thought is shorting a short squeeze rally when it looks to be near completion and go short USO. This would probably be a safer trade, but not as profitable in such a short period of time.