USO Trade Update

USO is a bit complicated for anyone new. I have a long term bullish outlook, an intermediate or swing term bearish/pullback outlook and as of Friday, a very short term bullish/speculative bounce outlook in which we opened a small position, Trade Idea: USO (Speculative) after closing a USO put Thursday, Closing USO July 17th $20 Put Position at a +45% gain, USO Follow Up. So far this morning's move has sent Friday's new position up nearly +23%.

I thought since there's such a gap up and because this is such a short term trade idea, we ought to look at it early.

 This is the daily chart for USO showing distribution last summer in a H&S top price pattern and 3C confirmation of the downtrend until price turned lateral with a 3C positive divergence. I believe this will end up being a primary trend upside reversal, but first I believe USO must return to the lower end of the base area and finish up the base before a stage 2 breakout sticks as the last one was forecasted to fail and it did.

 The intermediate term 15 min chart shows the reason why we have a USO equity (trend position) short, expecting downside lower in to the base area where it should do some more base building, until then though, I consider it a short trade with the exception of a very short term bounce we aw signs of Friday and the reason we opened a long/call position Friday for this short term bounce, Trade Idea: USO (Speculative).

 This 10 min chart which is fairly strong for a bounce shows the positive divergence last week forming for today's expected bounce.

However in context with more history, the same 10 min chart shows the very high probabilities that this is all the move is, a bounce.

 This 3 min chart shows a concept we see over and over again in any asset and any timeframe, the head fake move and how it is one of the last price-based indications we see just before a reversal. In this case we have a run on stops creating supply which is bought on the cheap without any suspicions aroused, you can see the 3C divergence right at the increase in volume as stops are hit.

As for the fractal nature of the concept, we've recently talked (and forecasted as far back as April 2nd)  about the head fake move on the daily SPX chart above the ascending triangle which was the highs that have led to the last 3 weeks of declines...

SPX daily chart and a head fake/false breakout above resistance of a large ascending triangle that easily captures traders' attention and which they will chase. Since then, the saying, "From a failed move comes a fast reversal" has held true, which was also part of the April 2nd forecast and expecctations, right to and/or below the 100-day m.a. (yellow).

Back to USO...

So far the 2 min intraday chart is confirming the gap up in USO and I'll keep the position open until I see something that suggests otherwise, however I usually like to close options before they start losing momentum.

I suspect we'll be looking to re-enter the USO short/put position as was our intention when we closed it Thursday in anticipation of a bounce to preserve gains and allow us to reopen the position at a better price with a more appropriate expiration.

Congratulations for those who took the trade, it wasn't an easy one to enter.