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USO DWTI Price Targets & Suggested Stop-loss

The price targets for the recently posted USO long/DWTI short trade will be T1 at 10.63 (for those only looking for a quick bounce trade), T2 at 10.98 and the current final target of T3 at 11.39. The suggested stop for those targeting T2 or T3 will be on a 60-minute candlestick close below 10.15. Once again, the entry posted earlier today is an aggressive entry with a more conventional, higher probability entry to come on either decent evidence of a reversal before the 10.15 level and/or a breakout above the top of the wedge pattern.

USO 60-minute 2 July 22nd

USO 60-minute 2 July 22nd

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Jul 22, 2016 12:26pm|Categories: Completed Trades - Short, Gold & Commodities|Tags: , |20 Comments

20 Comments

  1. GetItRiight July 22, 2016 2:04 pm at 2:04 pm

    I took this trade and holding just for the small bounce to T1 as I have no confidence in a stronger uptick of crude, what with all the crude products piling up along with crude now.

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  2. rsotc July 22, 2016 3:12 pm at 3:12 pm

    GIR – By all means, do what you feel most comfortable with and the fact that I list multiple price targets is exactly for that reason; some traders might prefer to target relatively small moves, book profits & move on to the next trade. With that being said, one thing that I feel extremely strong about is that the news almost always follows price action & more often than not, that news is priced into the charts in advance. By ‘in advance”, I am referring to before public dissemination of news (what your or I read or hear in the media) that is likely to impact the price of a stock or commodity. Those in the know such as industry & company insiders, astute money managers & investors, etc… are often aware of or foresee such changes in advance, such as when you say that you “have no confidence in a stronger uptick of crude, what with all the crude products piling up along with crude now.”

    Case in point. The last official short trade that I posted on crude was the short entry on USO/UTWI in this post on May 26th: http://rightsideofthechart.com/uso-uwti-trade-setup-entry/ , just 2.8% & 8 trading sessions before crude peaked after one of the strongest rallies in years. From that short entry (not just the top less that 3% from that point) USO plunged over 14%. However, what I would highlight, besides the fact those divergences played out as expected, is this:

    I did a Google search for the term “crude inventories” selecting the 1-week period leading up to that last short trade on USO/UWTI. I did not cherry pick the time period or results, which I think help to drive home my point that the news follows price & those trend changes are often reflected in the charts before the occur:

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    • rsotc July 22, 2016 3:19 pm at 3:19 pm

      ..and just to follow-up, here’s the headlines for a search of “crude inventories” for the past week (just as bearish now as they were bullish at the early June top):

      I often say that trading on news is akin to driving while looking in the rear view mirror.

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      • GetItRiight July 22, 2016 3:39 pm at 3:39 pm

        I get your point about us, little guys being late on receiving information compared to those in the know. I just don’t see crude getting back to 48.xx in the near term, corresponding to your T3, without an external event to precipitate it. To say that the money managers and producers foresee such an event, to justify that T3, is a stretch.
        If you followed the inventory data lately, there is a constant increase in the crude products inventory, including gasoline. The demand is still there, with the driving season underway, it’s just that the refiners built up a lot of crude inventory at lower prices and they are churning out the products now.
        At the same time, their profit margins are getting lower (the ‘crack spread’ I mentioned a few days back) which would make them buy less crude, adding to the glut.
        A third thing is the rig count, which has been constantly going up the last weeks, so much so that a total of 55 rigs have now been added in the last 8 weeks. This tracks perfectly the rise of crude from the lows.
        With all this, I am very leery about any big jump that the charts might show and rather take it one step, or rather target, at a time.

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        • rsotc July 22, 2016 3:55 pm at 3:55 pm

          All excellent points & I’ll certainly defer to, and appreciate, your knowledge on the fundamentals of crude oil. FWIW, my preferred target at this time is T2 (10.98) on USO. Should we get some upside on crude early next week, that should have confirmed this most recent divergent low on the 60-minute chart plus, put that wedge overshoot scenario into play.

          I also have my concerns about supply issues as more & more rigs will continue to come back online as/if/when crude prices move higher. However, just looking for what will hopefully be a multi-week swing trade right now, then back out unless the charts convince me to tuck the UTWI short away for a while. Still soaking up the decay from that GUSH short, which has benefited from the sideways chop in recent months. Maybe crude is ready to do the same, ideally after an initial pop & if so, UTWI should slowly but surely bleed down.

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          • GetItRiight July 22, 2016 5:01 pm at 5:01 pm

            Tied to my comment about the miners, I could see crude reaching your T2 next week, helped by dollar weakness after the FOMC announces their decision on Wednesday. Crude would have to reach 46.60 for T2, which will quite likely be the top of the bounce from these levels.

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  3. roguetraderone July 22, 2016 10:16 pm at 10:16 pm

    Been following WTIC (I’m short COP). At least from my inexpeienced eyes, I don’t see a hint of WTIC reversing. Particularly when I look at it on the weekly charts, it seems like it still has a way to go down with MACD just now crossing. My question is, can USO pop up without WTIC? Or am I looking at WTIC wrong and it is about to reverse? Unfortunately I can’t do an hourly on WTIC.

    WTIC Daily
    http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&b=5&g=0&id=p77136910764&a=466486538&listNum=1

    WTIC Weekly
    http://stockcharts.com/h-sc/ui?s=$WTIC&p=W&b=5&g=0&id=p68749163663&a=466486695&listNum=1

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    • rsotc July 24, 2016 9:00 pm at 9:00 pm

      roguetraderone: Nice charts. I agree that the daily & weekly charts don’t look so hot right now. Although I’m open to the possibility that it could morph into something more, at this time I’m only looking for a counter-trend/bounce trade in crude with my T2 as my preferred price target (about a 7% pop in USO/21% drop in UWTI). The reasoning for this trade is largely based off the fact that crude ($WTIC) has fallen to the top of a support zone that I’ve been targeting with bullish divergences on the 60-minute time frame. It may or may not play out but Friday’s entry, although an aggressive, catch-a-falling knife trade, seemed objective to me with an attractive R/R & a very good chance of at least hitting the T1 level by early this week. My daily chart of $WTIC is below & here’s a link to view the full-sized chart: http://www.screencast.com/t/3wKAZdwR3H

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      • roguetraderone July 25, 2016 7:14 pm at 7:14 pm

        rsotc,

        Thanks for the reply and the compliment, I’m learning a lot from you and others on this site. I hope the weekly technicals drag WTIC down some more but I do see on my daily, it’s at the edge of the cloud and bottom of the channel where it would not be surprising to see it bounce back up but, I’ll hold on a bit longer in the event it breaks the cloud and see some capitulation to ~42. I’ll go long soon after I cover my short on COP.

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        • rsotc July 26, 2016 7:54 am at 7:54 am

          You’re most welcomed roguetraderone. While not short COP, I am still short GUSH which is still an active short trade. COP of one of the top holdings of XOP/GUSH. There’s a good chance that I’ll probably be going long crude again after I close the GUSH short but will have to determine that at the time depending on the charts.

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          • roguetraderone July 27, 2016 1:56 pm at 1:56 pm

            rsotc,

            Well, that ~$42 support on WTIC has been reached, COP dropped along with it. I’m being greedy and not covering just yet but chances are I will soon, I think earnings are tomorrow, not sure I will hold through that. WTIC may well drop some more or at least I don’t see it turning just yet. Next time I play with oil stocks I will definitely look at GUSH and USO.

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        • rsotc July 27, 2016 3:48 pm at 3:48 pm

          Your COP has pretty decent support around 38.75 which, not by coincidence, aligns with the 31.70ish support from my XOP daily chart. Best to cover a good 10 cents or more above that level as I would expect a decent reaction on the initial tag from above & you don’t want to miss a fill by holding out for the last penny if the buyers step in early. Here’s my daily chart of COP, G-luck!

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          • roguetraderone July 27, 2016 7:37 pm at 7:37 pm

            Sorry to belabor this but at least I see a triangle that could break down. I also see a previous triangle that did. Problem is that if I try hard enough I can probably see a puppy begging for a piece of bacon formation somewhere in there. Question is am I looking at this right? If this has gone long enough, no problem Ill find out tomorrow one way or the other. I did get greedy and did not cover in any case. Last note, see how it broke thru the cloud on the last triangle? I know, I know, It works until it doesn’t.

            http://stockcharts.com/h-sc/ui?s=COP&p=D&yr=1&mn=0&dy=0&id=p79753569196&listNum=1&a=467747880

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          • rsotc July 28, 2016 9:26 am at 9:26 am

            @roguetraderone – No need to apologize, I love talking charts & kicking this stuff around. While your scenario is certainly possible, I’m just not sure on the measured target more so because I’m not sure about the downtrend line on that triangle pattern that you’ve drawn. When it comes to drawing trendlines, I like to say that any two points can be connected at random & that it takes a 3rd reaction in order to validate at TL. The downtrend line that you’ve drawn could connect the 6/8 reaction high & the 7/13 candle (and or those immediately next to it, which in my book, counts as the same tag or reaction). As such, I’d like to see at least one more reaction of that TL to help validate it.

            Trendlines aside, I have COP trading below numerous key moving averages on the daily time frame (20, 50, & 200 day EMAs), the MACD & MACD signal line are also below the zero line (bearish) and have yet to point back up yet. Although I can say that if I were short COP, I would be covering just above that 38.75 support level as I think it is significant enough to produce at least a decent bounce on the initial tag from above (btw, it hit a low of 39.00 in pre-market today, which could have provided a nice exit), you could also just place a trailing stop at this point, maybe 3% or so, which would allow you to protect profits while also allowing your profits to run, should the stock continue to trend lower for a while. Best of luck on the trade!

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          • roguetraderone July 29, 2016 12:39 pm at 12:39 pm

            Well, I did cover my COP short yesterday, no where near the $39 at premarket yesterday but, at a good profit. Now to start looking for another opportunity. Thanks again for the advice and charts Randy.

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  4. upordown July 24, 2016 8:09 pm at 8:09 pm

    hal cvx xom oih .. none of them have gone down on this crude pullback… odds favor crude rally.

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  5. pangblood July 24, 2016 10:10 pm at 10:10 pm

    @rsotc Hey Randy, Natgas seemed to be bullflagging and is now breaking out, the way I’ve drawn the bull flag leads up to the 3.6 ish resistance. Could you take a look and perhaps make this an trade if you see it being valid

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    • rsotc July 25, 2016 9:20 am at 9:20 am

      pangblood – The recent pullback in Nat Gas might be interpreted as a bull flag & at the very least, could be a healthy correction that was needed to reset the overbought conditions. Here’s my daily chart of $NATGAS with some key support & resistance levels, which could be used a price targets & objective entry or stop-loss levels if swing trading nat gas or any of the nat gas tracking ETPs.

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  6. drwells722 July 25, 2016 11:50 am at 11:50 am

    Randy, USO hit $10.155, Is this the entry, wait for 10.15 or more downside first?

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    • rsotc July 25, 2016 12:12 pm at 12:12 pm

      @drwells722 The official entry for USO (or a UWTI short) was where it was trading when posted on Friday with the suggested stop being a 60-minute candlestick close below 10.15, which is the level USO is trading at as I type & if you look at a 1-minute period intraday chart, you’ll see that USO has been trading nearly flat on top of that key support level all day, helping to validate that level as an important & well watched technical level.

      I’m going to keep the official stop as is, which means that it could be hit soon but I will also add that the 60-minute divergences are still in place so one could certainly go long here around USO 10.15 with stops maybe 2-3% below as I think that would still be a very objective long entry (or add-on to a starter/fractional position that was taken on Friday, which would thereby lower one’s cost basis & allow for a slightly lower stop calculated off the adjusted basis & preferred price target).

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