USO/Oil Follow Up

This is the last update for USO (Friday), Quick USO Update and the gist is the realization that this base is more than adequate for even the strongest counter trend rally and getting very close to being big enough for a trend reversal (up), this is why I decided on a half size position to allow some flexibility in dealing with USO and what it wants to become while still having exposure to what is shaping up to be a very strong (positive) looking set of charts.

Here's a broad update since we are looking at a potentially different scenario, leaning more towards a trending trade.

 The 50-day moving average for USO is obviously an important one, not that there's anything magical about it, but it's a popular technical trading moving average and in that way, creates self-flfilling events whether based on retail or how Wall St. uses it against retail, but you can clearly see a head fake before the USO top was ready to break allowing it to be sold at higher prices just before it dumped (relatively speaking) and several resistance areas including right here as well as 1 support area, for this reasons, a breakout above the 50-day is going to bring retail traders in, likely cause any shorts to cover and start a short squeeze. As for volume analysis, it is screaming "Change in character; that's a hard one to miss.

 On a closer view of the daily, here's our initial move we forecast up as well as the pullback we forecast at the top of that move and consolidation since which had been looking like a lateral rectangle, it's too big to be a true consolidation pattern now, I suspect it's a base. In yellow are the first head fake that was forecast below $18 as a stop run on some volume, you may recall I didn't like it much as it was so brief and these head fake moves are above all, convincing to traders, that brief dip wasn't convincing although it did hit stops. The next one was more significant and it looks like a breakout from a local trendline, but its also at a local resistance area around $18.75.

 Here's the local resistance at which we are hung up at right now, I suspect USO comes back down as it seems to be at the top of a base's range and moves toward an accumulation area lower like the last two breaks of $18.

As for a daily chart, the negative divergence/top (you can make out a H&S although the topping process was larger) and on a daily chart we now have a positive divergence, this is much stronger than what you'd expect to see for a counter trend rally only.

We are also getting some interesting signals from our custom De=Mark inspired Buy/Sell indicator.

Red is obviously sell signals and green is buy signals, this is a weekly chart so each bar is 1 week, thus even the buy signal to the left had a significant move of 10 some-odd weeks. The current signal is quite a bit larger, again more evidence pointing to a more significant event building.

On a 2 hour chart, the trend in this area is clear, it's still leading positive and still adding to that, thus I think we are seeing a broader base and the probabilities of a real trend reversal, not just a counter trend move and failure.

Futures for Brent Crude confirm as well.

This is a 4 hour chart of Brent Futures going positive from the downtrend. Note where the divergence really comes in to its own, right at 2015 when capital allocations are being shifted after the 2014 tax year ends, it's almost to the day of the first trading day of January on this 4 hour chart.

Range/base resistance appears to be around $25.25.

Locally while I wouldn't discount a short term head fake move possible above resistance around $18.75 (which is immaterial to me unless I'm "maybe" buying some short term puts for a pullback trade) just to help on a pullback, but not necessary. The 1 min 3C divergence suggests this is resistance and we do pullback.
What I'll be watching is if we do get a quick head fake above local resistance, it would be a potential put trade to consider so long as there's distribution in to it on short term timeframes. Otherwise the more important information is "What happens on a pullback to the lower end of the range?". I suspect there's an extremely high probability of accumulation, thus a larger base. If that happens, then there's a new trade set-up in which I'd fill out the other half of the USO position (tracking). I'll set the alerts and post of there's a quick put/pullback trade available.