Looks like I have been lucky with my timing lately. I called the most recent bottom in the markets , I called the top most recent top in oil on Tuesday the 3rd of August and I called the top in the markets on Monday the 9th. Each one to the day and each were big moves. I hope some of you made money or at least preserved your capital on my predictions.
One key tool in my swing trading system is the MACD oscillator which is for momentum. Some people use Stochastic or McClellan oscillators too. When I saw this indicator signaling that (NYSE:USO) was oversold and rolling over, it was clear to me that shorting oil would be a good bet. This was on Tuesday the 3rd and by market standards, it may as well be a year ago. In addition to oil looking weak, the US Dollar was poised to bounce back as well which would have a negative effect on oil.
What am I seeing now?
(NYSE:USO) is on my radar for a bounce. I would consider a swing long trade with a holding period of at least 3 days unless there is some sort of important news upset or anomaly.
United States Oil Fund LP ETF (NYSE:USO) Hourly Chart
Here’s an hourly chart of (NYSE:USO). The red line is the resistance level where it got rejected from and the red circle is the MACD rolling over. This was followed by a 7.4% drop in just a few days!
Now that we have the opposite indication, this is a good setup for a swing long trade. As usual, this market is moody and could turn very bearish again in just a few trading days, so I will be very light on my feet with this trade using very tight stops. Speaking of stops, this trade setup lets me use a stop which would only risk about $0.50/share which is a great risk/reward. My first target would be $35.10 and second $35.50.
Adding to my conviction is what looks like what could be a pullback in the US Dollar, which has been ripping lately.
Powershares DB US Dollar Index Bullish Fund (NYSE:UUP) Hourly Chart
Bearish momentum indication in the ETF that tracks the US Dollar, the Powershares DB US Dollar Index Bullish Fund (NYSE:UUP). Looks like it could see a pullback below $24, maybe to $23.70 or so.
Oil has been stuck in a trading channel for some time now. It will likely remain in this channel for some time, unless we get a complete meltdown in the markets or some miraculous rally.
United States Oil Fund LP ETF (NYSE:USO) Daily Chart
Unless we see a break of the channel, trade the channel accordingly and keep this choppy pattern in mind.