USO (Crude Oil ETF) offers an objective long entry here around the 15.35 level in pre-market trading or anywhere up to Friday’s close of 15.59 as it tests the March lows while oversold & with bullish divergences in place. The initial & sole price target at this time is 17.90 (just below the target zone) with a suggested stop below 14.70.
USO daily August 3rd
As this daily chart of highlights, USO is poised for a bullish crossover on the MACD, should price start to rise soon. That would confirm the bullish divergence that has been forming since late 2014 as this crude ETF makes a test of the March lows. Also note that the RSI has recent printed oversold levels that have preceded substantial rallies in the past.
With crude in a confirmed downtrend, an entry at this time should be considered an aggressive, counter-trend trade. More conventional traders might opt to wait for some technical evidence of a potential reversal, such as a bullish candlestick pattern accompanied by a bullish crossover on the MACD as well as the RSI crossing back above the 30 level.
With the potential for a multi-week or even multi-month swing trade along with the likelihood of additional targets to be added to this trade going forward, my preferred vehicle for a long in crude oil will be to short DWTI (3x short/inverse crude ETF) as the decay from the 3x leverage would add to the performance of a rise in crude oil prices, should this trade play out. Due to the 3x leverage, it is only prudent to reduce position size by 1/3rd if shorting DWTI (vs. going long USO). Keep in mind that although I am shorting DWTI, it will appears under the Active Long Trade category, as it is effectively a long trade on crude.