USO (Crude Oil ETP) is piercing through the bottom of this 60-minute bullish falling wedge pattern on what is likely to prove to be an over-throw of the wedge followed by a reversal & upside breakout. While I'm on watch for signs of a bullish reversal or possible near-term selling climax for a buy signal but with $WTIC & $CL just above my downside target of 43.50, I'm going to add USO as a long and/or a short on DWTI (3x bearish crude ETF) as an official but aggressive trade idea here. DWTI current price is 96.60. Price targets & suggested stop to follow asap although my rough stop will be on a 60-minute close below 10.15 (about 1.5% below on USO) with a minimum price target around 11.00 on USO.
Again, this is an aggressive entry in anticipation of a reversal in crude which has been in a solid near-term downtrend since early June. My plan is to only take a 1/2 size starter position (also adjusted down by 1/3rd to account for the 3x leverage of DWTI) and only adding to the position on strength in crude, not averaging down on weakness. A higher probability, more convention entry on a long in USO or DWTI short would come following decent evidence of a reversal and/or a break above the falling wedge pattern.
Member @nico1971 had inquired about crude in the trading room yesterday in which I posted the following comments & 60-minute chart (first below with the 2nd chart being today's updated 60-min): "Upon further review, I’m leaning towards another thrust down within the wedge before an upside breakout of this falling wedge pattern although it could come sooner than later. I’m also still leaning towards a move to at least the 43.50ish level on $WTIC so I’ll hold off from posting an update on the front page for now. Here’s my 60-minute chart of USO:"
My preferred proxy for this trade is to short DWTI (3x bearish crude etf) as that will allow me to benefit from both the price drop, should crude reverse trend soon as expected, as well as the decay suffered from 3x leveraged ETFs over time, especially if crude experiences a lot of choppy or sideways trading in the coming weeks although my price targets & expected holding period are still yet to be determined. Also note that if this trade starts to play out with the charts of crude firming up, I may close out the XOP/GUSH short trade earlier, although still profitable.