SCO Ultrashort Crude Oil ETF Daily Chart; Oversold; Falling Wedge; Positive Divergence; Lower Band Violation

Oil has been on a strong run higher over the last few months as evidenced by SCO, the 2x short oil ETF, falling like a rock. As posted about a week ago, the crude oil COT chart indicates a near-term top in oil is at hand.

The daily chart show oversold RSI and stochastics which woul dlike to see a bounce. Money flow comes off oversold levels. The green falling wedge is a bullish pattern where price typically launches higher (the opposite of a rising wedge which typically creates a crushing spankdown). Price is extended to the downside for SCO requiring a mean reversion higher.

The lower standard deviation band was violated so price needs to show the middle band, the 20-day MA, at 22.31, and falling, some respect. The green lines show universal possie d across all indicators so a bounce is expected in this daily time frame.

The SCO weekly chart is in the same shape with universal possie d so price will want to float higher over the coming weeks (oil lower). On a weekly basis, SCO may want to relax to the same matching lows after a little bounce occurs in the days ahead due to the chart above, but the weekly chart is basing and the rise in SCO going forward should continue for a few weeks. Thus, crude oil is topping now and will likely track lower over the next few weeks.

The expectation is for SCO to rally over the coming days and week or three targeting 21.20-22.50. SCO may receive a quick pop as the week begins and then relax lower again which would be another buying entry. If nimble enough, and if the initial spike is large enough, the long trade can be exited, and then wait for price to relax a little bit and then buy SCO again and perhaps hold if for a week or three. Keystone does not have a position in SCO currently but will probably buy some going forward and play around in this short oil arena for the next three weeks. 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.