USO Follow Up and Update

Yesterday I closed the USO July 17th $20 put position, Closing Out USO July 17, $20 Put. The idea was to take the puts' gains off the table and let the USO equity short (+5%) carry on for now, but once again options have different dynamics effecting price than just underlying price alone.

The P/L from yesterday's closure of the USO puts ended up looking like this:

The P/L came out to a 26+% gain, today that would have been barely above breakeven.

As for USO itself, it's important intermediate charts are changing character and a pullback deeper in to the base area under $20 is looking less likely with the more recent change in the charts. I'm leaving the USO equity short in place just to make sure these aren't transient moves, if they continue to strengthen, I'll close the USO equity short and start looking at the next trade which would be a USO primary trend long, or at least that's what I expect.

Charts...

 Just when USO breaks below the triangle at the base's upper resistance trend line and on volume suggesting stops were hit, the charts seem to be changing.

I've expected a break lower in the the base area around $16.50 to $20, then to see the base finish work with large positive divergences and switch positions over to a long term, primary trend long position.

 USO 1 min intraday looks to be pretty much in line as does the CL 1 and 3 min Oil Futures (Brent) charts.

 This 3 min USO chart is leading positive at yesterday, a good reason to close puts that expire this month as the time decay eats away at gains. However this isn't a concern as far as the bigger picture I've been expecting.

Remember tonight is the Crude inventory API data and tomorrow morning the EIA inventory data, both of which have been a sort of good cop/bad cop recently ramping in to the API and selling off on the EIA.

The USO 5 min chart is nearly identical to the 3 min chart so this is strong confirmation for near term trade and a good reason to close the USO puts yesterday and preserve those gains.

It's around this 15 min chart that I see changes that are a bit bothersome as this has been the chart suggesting USO pulls back deeper in to the base area. Note the recent change to the right, although not a leading positive divergence it is a change in character.

 The 30 min chart which has been the most spot on as far as previous/historical confirmation, still shows a negative tone so I'm waiting to see if the 15 min chart's recent tone migrates to the 30 min chart before making any decisions on the USO equity short and certainly before deciding to consider a primary trend long position.

As for Oil futures, these are Brent so there's a slight difference between Brent and USO which is WTI crude, but in the past they have held the big picture together.

 While the 1-3 min charts are in line with price, this 5 min chart, like USO is leading positive, the thing that causes me some caution is the bulk of that leading positive divergence happened in the low volume of overnight trade.

 The 10 min chart shows the same, also in the low volume overnight hours primarily.

These charts weren't part of my concern yesterday.

However around this 30 min chart, the negative divergence that had been supporting my view has turned positive to the far right.

 As well as the 60 min chart which had also been supporting my view of more downside.

This is a close up of the positive area on the 60 min chart above this one.

So I'm going to remain a bit patient, but I'm not very hopeful at this moment. The charts have not gone definitively against my expectations, but they sure look like they are moving toward that direction.

As far as the longer term primary trend long, this is the CL/Oil futures daily chart. You can see the H&S top and distribution last summer leading to the slide in prices and then a positive divergence and lateral trade like a stage 1 base. That saw a bounce out of the base just like USO and still reflects a divergence suggesting a move back in to the base so all hope as far as expectations is not lost, but that's not the reason I post the chart. The reason is, before I would enter a long term long in oil, I'd want to see this daily chart show a much stronger positive divergence than we currently have at the far right where there's still a negative in effect.

More on USO as it develops.