Wednesday, November 6, 2013

Wednesday evening


Wednesday afternoon


Wednesday morning

USO Daily Chart
I've never been one to trade oil and I have no position now but I have noticed that gas prices have been receding around my neck of the woods for a couple of months now.  I would not be surprised to see regular below 3.00 by Thanksgiving.  That made me look at USO and when I squinted just right I saw a head and shoulders staring at me.  The neckline looks like 36.50 with the top of the head reaching 39.54 so that would give a minimum downside target of 33.46.  It closed yesterday at 33.67. A quick check of the stochastic and I can see it poised to print a buy signal and volume is about average.

The Trade
I may not get in but this is what I would plan:  Take a 1/4 position on the next open candle. I would like to buy into the close on that day.  My stop would be about 20 cents below the entry.  I would look to add another 1/2 position on the first open green candle and fill the last 1/4 on a bounce from an intra-day dip.

The target is a test of the neckline and I would sell into that level.  While the 200 day sma has not been particularly relevant the price did fall below and immediately trade back above it so don't be surprised if it makes a mirror image of that action on the way up.  If the position is not already full then the bounce would be a good spot to buy the last piece.