Friday, January 8, 2016

USO Oil Fund ETF Weekly and Daily Charts Oversold Falling Wedges Positive Divergence Lower Band Violations Mean Reversion Needed

Oil has been bludgeoned badly as shown by the charts above. The USO charts are the same as the WTIC and Brent oil charts so this same analysis applies there. On the weekly, price has violated the lower standard deviation band so a move back to the middle band at 13.44 is in play. Price is at an extreme under the moving averages so a mean reversion higher is needed.

The same set up is in play on the daily chart which is what you like to see before entering a speculative long play. When both weekly and daily charts line up with universal possie d across all indicators that leads to a bounce over 95% of the time. Price will want to move to the middle band on the daily chart which is 10.86. Keystone opened a long position in UCO yesterday afternoon and will likely add and hold the position even if USO drops into the 7-10 range (USO is a safer 1x long oil play and UCO is a 2x long more risky). The idea is to look for a nice healthy bounce, especially with shorts covering, and to not get too greedy after the nice big bounce occurs.

The monthly chart is agreeable to a base forming but oil prices may remain subdued for the first three months of the year near these lower levels. The WTIC (West Texas Intermediate Crude) oil 32 price should hold but if not the 27-29 will very likely hold as a solid base this year. In this near term, however, it is likely time for oil to print a relief rally with USO recovering to 10-14 due to the falling wedge patterns, oversold conditions, positive divergence (green lines), lower band violations and mean reversions needed due to price over extended to the downside. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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