USO trade ideas
WTI-Brent Spread ShortWTI/Brent spread up to $11 today I had big short last year @ 24
Loooking for a move back down to $3 by the end of the year but
expecting news of early take up of Keystone pipeline."
The market has quickly accepted Libya output but failed to
appreciate how delicate the situation there is the PM having
just been kidnapped and works only back to work a month.
23/9 Market RecapHello Traders!
This week the market experienced a mediocre decline, this decline is a continuation of the - apparently false - 171 breakout that happened two weeks ago. Of course, after such a thrust upward, it is only healthy for the market participants to realize some gains, but on a technical point, we would prefer to see a slower motion rather than the fast decline earlier last week. A point of optimism is that the down volume was on a decline regarding the positive momentum of the up volume.
As for the near support level, we are actually sitting on one - 167.50 - this level is both a low DIG Pivot and a high DIG Pivot from previous price swings (For more information on DIG Pivots Indicator, please refer to ProTradingIndicators.com website. Available on TradingView for $29/Month). Apart from being a double pivot level, this area of 167.50 is where two gaps occurred during the past month, which adds up to its importance. The next super important support level happens to be at the next low DIG pivot at 163. This level is in fact a bouncing point from the upper trend channel which formed since early 2013. Breaking that level downward will probably trigger a consolidation period, or worse, a decline phase.
As for resistance levels the job is much easier since we are at all time highs and the recent decline implies the near resistance level of 173.50. Between those 2 important levels of 173.50 and 163 there is much room for the market to “digest” the recent bull run, as always, we will keep a close eye on the market for further development.
Metals & Oil
It looks like the USO, the Oil & Gas ETF, has lost direction in some way. It has been over a month that the price wanders between farther and farther price levels without a clear direction. This price action implies that there is no fixed balance between buyers and sellers, but the opposite, for now there is no “leader” for that market and it seems that the boundaries of the current situation are 39.50 as the upper bound and 36.30 as the lower bound.
As it happens, USO is currently slightly above the 36.30 lower bound - 36.85 - a bearish sign for now, but the nature of these technical formations dictate that the boundaries could widen up, meaning that new lows and new highs will be set - Still with no clear direction of the trend.
GLD on the other hand acts like it’s heading back to a bearish picture. Prices fall fast with high volume makes us believe that the recent break through the negatively sloped channel was just a momentary profit taking. For now, an important support level should be watched, the level of 124. Breaking this level on the down side will set a new down trend as we will inaugurate a series of lower highs and lower lows.
Economic Calendar:
Oct 1 @ 10:00 AM - Consumer spending.
Oct 3 @ 10:00 AM - Factory orders.
Oct 4 @ 08:30 AM - Unemployment rate.
USO 3m analysis - short heading into the weekendOil prices were very soft coming out of weekly options expiry and heading into the weekend. There was considerable open interest in the $37.00 put options (4k) so if those holders were exercised then there ought to be a bit of stock overhanging the market through the coming sessions. As the close of Friday approached a 3m 'BoT' short setup developed. While I am unable to hold onto positions through the weekend, it is relevant to at least respect what the market is telling us. Indeed, if I had my druthers, I would like to be short from the $37.03 area with a stop just above $37.15 (13 ticks risk) and a target of $36.68 (35 ticks potential reward). Ideally, I would prefer to have on 2 cars and cover one at indicated target while leaving the remaining 'freebie' on with a stop at b/e and a target based off the higher time frame analysis....
USO 30m analysis - sharp bear flag points to violent spike lowerOil prices looks a bit bearish in the near term. While just outside of our text book 'BoT' trade setup criteria (counter trend rally was less than required 33%) one can make the legitimate argument for a short on a move through the bottom of the recent trading range. Higher time frame analysis suggests there is more downside potential and momentum in the near term has quietly slipped through its uptrend line support. If this is indeed a new bear ab=cd pattern forming, 'BoT' model levels suggest a short at $36.89 with a stop just above $37.38 and a target of $35.42 (49 ticks risk for 147 ticks reward). Since this is a bit of risk, one might want to look at the very short term charts as we seem to have a 3m 'BoT' short setup working at the moment too (please refer to 3m analysis for more on that). Should you be able to put on 2 cars at the 3m 'BoT' trade level, look to take profits on half the position at 3m targets levels but shoot for the 30m targets on the remaining 'freebie'...
USO - 4hr analysis: Slowly working down to Fibonacci targetsFrom a four hour perspective oil prices (as represented here through the ETF - USO) have now been trending lower for two weeks. The peak into Friday the 13th (and its subsequent failure the following Monday) confirmed a broader market downturn as our time tested 'trending' indicator (that being the relationship between the 13ema and the 30sma) turned negative. That failure also confirmed a bearish 3bar candle reversal pattern, a Head & Shoulders top pattern and a 'bot' short trade setup. That top was also confirmed by momentum as our MACD Histogram has slowly made lower highs and lower lows since that event.
So if the market had indeed topped, where should we be looking for that correction to take us. A natural pullback of the rally coming out of the June lows suggests three significant short term technical targets.
1. Our '1st stop' 38.2% Fibonacci level
2. Our 2nd target 'the 50% rule'
3. Our Ultimate target a 70.5% retrace into the 'OTE Long Sweet Spot'.
After gaping lower, price spent a good portion of the past week flirting with the underside of our '1st stop' target (37.39). This repeated rejection (the last one came on a touch of the 13ema) suggest the 37.39 area may now be significant resistance. Interestingly, it also sets up a new shorter time frame 'BoT' short opportunity (please refer to USO 15m analysis for information on that). Since the 200sma and the significant low of August (36.35) sit right at our 2nd target, 'the 50% rule', I am fairly comfortable with the idea price will visit this area in the not too distant future.
Ultimately, I expect the oil market to work its way down into the OTE long sweet spot neighborhood (34.92) before it can start its seasonal bottoming process ('buy when it snows, sell when it goes'...and all that). That area also corresponds with that shorter time frame 'BoT' short setup target too. How exactly we get there is of course anyone's guess but the setups and targets are in place.
USO 15m analysis - hurry up and chopTrading oil over the past two weeks has been an exercise in frustration. While Geo political tension ebb and flow, price has basically gone nowhere. We ended August in the low 38.00 area and have basically oscillated around that level since. While we did finish the week with a 15m 'BoT' long setup confirmed and working, I am not holding out a lot of optimism for the trade going forward. Yes, I think our 'move stop to trail' level ought to get hit (suggesting we ought to walk away from this long trade with some profits) but I am not holding my breath for a whole heck of a lot after that. My hunch here is we do another 'stop run' to take out weak shorts above 39.00 then roll back over - lets see what happens....
USO - 3m OTE & BoT long tradesText book panic open leads to gap fill. Two possible entries. 1. OTE long ss touch (on severe momentum divergence) when market tested open 2. BoT long setup on momentum confirmation with oversold W%R.
USO Psychological LevelsThese Fibonacci levels are important to consider when trading USO, specially the levels 0.382, 0.5 and 0.618. As always use different techniques when trading to increase your probabilities/odds. Cheers!!!
USO 120M - last gasp into seasonal peak?USO finally hit the long standing 200% range extension target with its latest push to new highs. Considering seasonality issues, it shouldn't surprise us too much to see this last move higher was on divergent momentum and seems to have failed to recapture a key uptrend line. After a sharp little pullback recently, a test of those highs seems realistic given momentum's short term stance and the fact that if this is indeed a significant top, some sort of 'M' or double top price pattern really should be in order. Regardless, current OTE buying levels are substantially lower than where we are at present. I for one shall be reluctant to be too bullish until we are beyond this historically tough time of year for asset prices in general and hopefully back into those OTE levels.
USO 15m analysis - Dead-cat-bounce into resistance, now what? Considering the bullish momentum divergence coming into today's session it shouldn't have surprised anyone to see us move our way higher today. That divergence seems to have played itself out as the resolution of the current wedge pattern will probably dictate trade going forward. As for price action itself, it is interesting to see how we played with yesterday's two highlighted down trend lines through today's session. First we opened right at the initial, then after a substantial pullback, worked our way ultimately up to the second. Fascinating too, both the pull back from the open and the subsequent rally filled gaps left on the chart. Once the gaps were filled, the moves literally stopped on a dime - both times, remarkable. I have expected the first week or two after the Labour Day weekend were going to be quite volatile - I didn't expect this!
USO 15m analysis - Long slow march back to OTE long sweet spotWhile it looked for a brief window of time like the bulls were trying to control, with the break of the significant low of 38.20 it would appear as though the bear seem to still be in the driver's seat. The standing targets for the current pull back have been first a test of the 38.2% fib level (38.65) and then an ultimate move back towards the OTE Long Sweet Spot (37.74). As outlined in today's chart, the break of 38.20 sets up a short term ab=cd pattern that also paints a target in and around that OTE level. I for one shall be keeping an eye out for that target to be hit through the next session or two.
USO 3Minute 'BoT' long setup taken todayHere is a long trade I did today (through CL futures) expressed in USO terms. This is an excellent 'base hit' trade as the 1.5 reward to 1 risk level was achieved by simply moving my stop to trailing (in USO's case I find a 10 cent trailing level works rather well). I was flushed out at a nice healthy profit on the double top failure later on in the session.
USO 15m Anaysis - She bounced and then stalledIn a most interesting turn of developments, the previously mentioned key low of $38.21 did turn out to be a significant pivot point for USO. I say this because the US stock market was closed through Monday yet futures markets were trading. Crude Oil itself did violently gap lower through the Sunday evening session but by time today's retail trading rolled around prices had rebounded. So much so, USO actually gaped higher to start today off - go figure. Because of this odd trading, I still do believe we need to have USO itself trade down into that OTE Long Sweet Spot and maybe today's price action has set that move up. Specifically, we rallied through the early part of today's session (I was able to get one long trade off and took 36 ticks by going long at 107.84 and exited on a trailing stop at 108.20) up into resistance (the previously mentioned potential bull 'bot' formation key entry level and hourly trend line) and then promptly failed. The failure can clearly be seen in the momentum indicator as we actually finished the day with a negative reading there. While it is far too early to call a 'top', I shall be watching tomorrow's session for signs of that top and a potential trade down into the larger time frame OTE L SS zone.
USO 15m analysis - the politicans may have put in a bottomAfter hitting my first downside target (38.2% retrace of the move up from $37.00) prices continued to work their way lower. They ultimately touched the 200sma, the 50% retrace level and came within 1 penny of touching the old breakout higher at 38.20. Prices violently reversed and momentum promptly shifted to the bulls as word that both the Sec. of State and then shortly after that, President Obama would be speaking on the recent concerns coming out of the Middle East. Mr. Kerry's comments garnered the most attention as prices violently spiked higher and then quickly retreated once he was done. It would seem the geo-political 'risk' of being too short was just too great as the swing had many hallmarks of a 'stop run' in that it both failed to break the previous highs (38.84) nor did it change our 'trending' indicator (that being the relationship between the 13ema and the 30sma) which was/is still pointing down. Put it all together and while we are still pointing lower, one can't help but feel we are closer to the end of this move, not the beginning. While I am not totally convinced we have 'bottomed' just yet, I have included a potential 'Bot' long setup on this chart to give you an idea of where I am looking for this market to go once it does find buying support.
USO Bearish GartleyUSO popping based on the recent Syria turmoil. These moves always get faded. It is in a perfect Bearish Gartley. Looking for a retrace somewhere in the $36.40 range.
USO 15m analysis - the bull looks to be getting tiredAfter yesterday's initial text book ab=cd target hit (please refer to previous posts for more on that) I didn't do much else through the trading day. Indeed, the US session was itself rather uneventful. Today, like yesterday, we gaped higher again into the US retail session. The difference today is we put in a rather well defined double top (or 'M' top), tested it and then failed miserably into the US retail cash close. We entered into the gap (which in itself is bearish) and are now firmly pointing lower. My two initial targets going forward are a 38.2% retrace of the big up-move and then ultimately a 70.5% retrace of that move. This may take some time to develop (and we may actually close near these levels heading into the weekend) but considering current momentum readings, I for one shall not be buying until we see a serious bottom come in. I will be hunting/stalking 3m bearish setups to profit from the anticipated move lower.
USO upside target nailed on US cash market openWow, I certainly wasn't expecting to wake up today to this. USO opened with a violent gap higher, hit the posted target ($38.91) and the failed. Remarkable!!!
USO consolidated and now pointing higher??Today we consolidated a good portion of the session and only in the last hour of trading did we actually turn back up. The correction itself was back to about 33% of the up move which qualifies it for a potential bullish ab=cd price pattern. Additionally, momentum has both bottomed and turned back up through the 0 line suggesting that the 'fail' status there has been removed. While nothing is guaranteed, The reward vs. risk of going long here makes this current setup quite attractive. Long from 38.02 with stops just below 37.71 (.31 risk). The target off this pattern suggests an ultimate upside target near 38.91 (.89 reward)...
USO 15m Analysis - rally target window hit and exceededThe anticipated consolidation of yesterday's late session surge was indeed both swift and violent. Price gaped lower, probed below yesterday's value highs, then reversed violently higher. Action far too violent for my small account's risk threshold. As a result, I ended up just watching today. As we head into the Labour Day weekend it seems the markets are trying to end the summer session on an up beat note. The 2 hour OTE Long Sweet Spot ($37.00) has indeed proven to be a significant pivot. Price has now exceeded upside 'dead-cat-bounce' criteria and the fact that the rally was greater then 66% leads me to believe there may be more bullish action to come. The depth of what ever pull back we see over the coming session or two ought to at least start to build a potentially bullish scenario going forward. Indeed, it may take at least that as momentum currently is in 'fail' mode after a significant bullish reversal.
USO 120m Chart with analysis heading into seasonal topOil investors have enjoyed a nice rally through the summer of 2013. While we may have not seen the absolute highs, price seems a little heavy as we head into typically a seasonally tough time of year. While Oil fundamentals may remain relatively good (or even improve) considerable macro-economic risk is shortly on the way out of Washington. Additionally, the idea of ending QE programs seems to be gaining inertia too. Put it all together and I wouldn't be surprised to see a healthy correction begin in earnest once we are on the other side of the German elections (September, 12th).
USO 15m Analysis - price moved higher as anticipatedToday USO continued to press higher through most of the session. I was able to take advantage of the rally from the open and finished my trading day around 9:30AM pst and up 91 ticks (paper pre my Aug. trading plan). After three sessions of almost no activity it was nice to see a bunch of profitable trades. I do see that another wave higher occurred through the second half of the session which has further propelled us up towards my ultimate target zone $37.70 to $38.20 area. Since the last burst higher was an almost vertical move, I shall be looking for some kind of consolidation before considering my next trade.
