Trade Idea: Adding to SPECULATIVE USO Calls

Although buying USO seems like trying to catch a falling knife and it may very well be, that's why it is SPECULATIVE, I do believe there's an edge, pardon the pun.

The last USO call position entered was here, Trade Idea: USO (Speculative Options) Jan $22 Calls on December 12th. When I said speculative for the January 16th, $22 calls, I meant speculative, the position was 1/5th the size of a normal options position and what I'd be adding today would bring it to 2/5ths, less than half size which is my normal speculative size position (half size), so even in adding, this is still smaller than the typical speculative position.

I could go in to some fundamentals like the US probably NEEDING to do something to save the higher cost domestic suppliers that Saudi Arabia is choking out of the market, but at a cost to their own economy. I didn't read beyond the headline, but I believe this oil war is causing Saudi Arabia it's first budget deficit ever, but it's hurting US oil producers worse as many can't get oil out of the ground for the price it's selling at now. Perhaps this has something to do with the US military build-up along the Iraqi border in Kuwait? A little something to cause uncertainty and send oil prices higher?

In any case, this is based on charts and the position size is commensurate with the charts.

I'm keeping the January calls in place, and while I'd like to add to the January calls at these prices, I don't think that is the best decision when you look at it from the perspective of a new position and not trying to save an old one. So the new position will be February 20th expiration/ $20 strike.

 First of all, this 2 hour USO chart should show pretty convincingly, I do not expect anything beyond a short squeeze, not a trend change.

Now that we have that settled, exhaustion gaps, even if only temporary, tend to fall a bit more before they settle and create a base to move up off. The price ROC is clearly moving in a much shallower, more lateral, base-like direction since the gap with a 15 min leading positive divergence.

 The CL/Crude Futures 15 min chart doesn't have the same amount of history, still it's showing a nice recent leading positive divegrence as well.

 The 10 min chart is leading positive and note the last couple of days refusing to make lower lows and looking like USO has established a toehold here.

 The 5 min trend shows 3C in line and confirming the downside and even becoming more negative just before the gap, both the gap and 3C movement just before it look like a selling capitulation or exhaustion event. This was a long trend down and a strong one so I wouldn't ever expect a "V" shaped reversal, the market tends to have some proportionality to it. At 3 note the change in character of 3C after the gap and at 4 the change in character of price's rate of change.

 The very short term intraday 1 min also shows something interesting in the flat area of the last couple of days as well.

And looking at my long term custom DeMark inspired buy/sell indicator, even if you took the earliest portion of each buy/sell signal, these are the returns you would have made long and short and we have a current buy signal in effect.

Thus I think it's worth a speculative position or add to.