USO / Crude Update

Last night in the Daily Wrap I expressed my frustration with USO which has intermediate term signals calling for a pullback, but USO has tested my patience which is pretty rock solid. The one redeeming aspect of the trade is the USO equity short's gains were offsetting the USO July 17th puts' losses, this morning they are both in the green.

Despite some intraday (small) positive divergence developing in USO yesterday (that which caused my loss of patience with USO last night), it looks like we may finally be getting the solid break under the $20 area and back in to the long term base.

I'm not going to detail the entire outlook/trade ideas for USO, but the gist is that a pullback (which will put the USO short and puts at a greater gain), should start to se longer term accumulation at some point in to the pullback for a primary trend upside reversal, at which point all USO/oil shorts/puts will be closed and the next, long term trending trade, USO/Oil long (with the appropriate evidence of accumulation) will be entered, this is the larger trade, the trending trade that I'm most excited about, but to get to a reasonable set up, we need the pullback first and it appears that is under way right now, although it wouldn't be the first time recently that it has started such a pullback and failed.

As for the charts...

 This is the longer term base area at #1 after the stage 4 decline from last summers breakdown at #4.

The yellow arrows are the general price movement I have expected, a pullback in to the base range, it finishes some work there and gets ready for a primary trend reversal to the upside,  the larger trend trade and the one I'm most excited about.

 The problem has been a break back down in to the base's range, but after noting this triangle. it looks like we are getting a break below its apex and back in to the range which is defined at about the $20-$20.25 area.

Although as I said, this hasn't been the first time USO has looked to move back in to the range and then failed and sat around the top of the range as you can see above.

Remember the parabolic rise in oil earlier this week (Tuesday) , these moves I never trust and you see why as it failed just about as spectacularly as it shot up which is the norm for these price moves.

So far this Crude Futures (Brent) 10 min chart  is in line and confirming the downside.

 This 2 min intraday 3C chart of USO shows the parabolic rise on Tuesday before the API data and the drop Wednesday on the release of the EIA inventories. It is the short term (2 min) positive divergence developing yesterday that was irritating me last night after crude broke the parabolic pop.

Remember these 3C charts usually pick up where they leave off (in the cash market),  however in this case, it looks like overnight futures action may have caused some deterioration, it's a bit early to make a definitive call, but there's already some negative deterioration this morning in the 3C chart above and...

This is the overnight crude futures which was in line/confirming the downside.

I'll have to check on the 3C intraday charts as trade settles in after the morning games and dust up, but so far we are at least below the $20 level. I'd like to see us go to the $16.50 area, but either way, as long as we get back inside the base and stay there for several weeks/month.

I'll update you as soon as the charts start to catch up to the overnight developments.