USO: Short entry stop $32.21 / Exit stop $32.49

Here's finally a real order after a string of paper trades. Remember USO? I was long in USO not too long ago. Well, the same channel that told me to exit my long position is looking toppy.

One thing I learned from my USO trade is that this ETF is a money losing game. [The roll over every month of contracts put a severe strain on USO share price][]. And yesterday was the last day of this month's rollover. At around 1:30pm yesterday, there were some significant volume with dumping of USO shares at \$32. This is the first sign of distribution of USO shares.

Then today, I see the same thing happening at the intraday resistance. Sudden spike in volumes within seconds at the resistance of \$32.42. This is a sign that a big player is dumping shares.

However, this is mere a conjecture on my part. This could also be a way for some big players to rake in more shares. So don't rely on this too much.

Looking at the bigger pictures though, I see weaknesses in the weekly and daily charts too. Also, the break to the top of the up channel (Figure 3) was only greeted by low volumes. So it's unlikely that we will break further up from here.

Anyway, this is a small play with a tight stop and high probability (contango is on my side this time around) of success, that is if I don't get stopped out first.

Short entry stop: \$32.21, just below some intraday congestion and support from last week.

Exit stop: \$32.49, intraday top so far.

Target: \$29.50. 50% Fib level from this rally and near bottom of a huge congestion zone in the recent months.

Reward / Risk = 2.71 / 0.28 = 9.7 > 3.0

Update: USO dipped below \$32 in the pre-market on Monday. But I'll pass because I'm very low on available cash in my trading account. I need to limit my risk exposure even though I still think this is a great opportunity. I'll put this one in a paper trade just to see how it goes. Order is set for an entry short stop at \$31.99 to be submitted at 3:30pm today.

[caption id="attachment_1369" align="aligncenter" width="500" caption="US Oil Fund (daily, weekly)"]US Oil Fund[/caption]

[caption id="attachment_1370" align="aligncenter" width="500" caption="US Oil Fund"]US Oil Fund[/caption]

[caption id="attachment_1371" align="aligncenter" width="500" caption="US Oil Fund"]US Oil Fund[/caption]

[The roll over every month of contracts put a severe strain on USO share price]:

Posted 08 May 2009 in stocks.

BOUGHT +2 USO 100 MAY 09 28 PUT @.35

I just closed my USO long position. I bought back the puts that I wrote for \$1.75 about a month ago. This represents a realized profit of \$280 - \$15 for commission. I actually wanted to get out of this position last Friday when USO tested \$30. But my stop was never triggered so I held on to the options through the weekend, thinking I'd benefit from the time decay anyway.

Today, USO reached \$30.50 with some relatively low volume. \$30.50 also mark the top of a recent up channel (Figure 2). With my limited profit potential at this point, I'm inclined to take my profit than risk a retracement.

This trade has certainly been a roller coaster ride. The price of USO didn't move up as planned. It actually took a dive but picked itself up back to around my entry price on a slow up move. In the end, it was the time decay of the options that helped to make this supposedly losing trade into a winning one.

This is another example to favour writing puts instead of buying shares in this volatile market condition.

On another note, I'll look into USL instead of USO in the future for any Oil trade. The April roll over contango took a stab at the USO price last month. I was lucky for the short put strategy saving me.

[caption id="attachment_1347" align="aligncenter" width="500" caption="US Oil ETF"]US Oil ETF[/caption]

[caption id="attachment_1348" align="aligncenter" width="500" caption="US Oil ETF"]US Oil ETF[/caption]

Posted 04 May 2009 in stocks.

Buy Stop +2 USO 100 May 09 28 Put .65

I have placed an exit buy stop for my USO short puts at \$0.65. In other words, I've placed an exit stop for my long USO position.

USO tested the recent up channel on low volume today. Furthermore, NY Crude futures (QM) at \$53+ is nearing a long term resistance of \$55. So there's not much upside left in this. Thus, I've placed an exit stop just below an intraday support to take some profit. I'm just trying not to be greedy here. I'll write a more thorough analysis if this stop gets triggered today.

[caption id="attachment_1333" align="aligncenter" width="500" caption="US Oil"]US Oil[/caption]

[caption id="attachment_1334" align="aligncenter" width="500" caption="NY Light Sweet Crude"]NY Light Sweet Crude[/caption]

Posted 01 May 2009 in stocks.

Review of positions: SRS and USO

My SRS position is deep underwater. To add to the mistake, I added to it last Thursday in a hurry hoping for a rebound from a massive selloff to a new 52-week low. Even though the chart looked like it was testing support last Thursday, I should have waited for a rebound before entering. And second, if I don't even have the time to write my trade log, I should never enter a trade.

This is definitely a wakeup call to rectify my tendency of entering too early in the short term. I have since mentally walked through what I should have done and have come up with a simple entry strategy that I will follow from now on. Basically, I will wait validation of a intraday low and then enter only if it passes its intraday resistance. Then I will set a hard stop just below a recent support. This will no doubt create a lot more stopped out trades, but it's up to me to find high probability trades. All it needs now is some verification...

In any case, I clearly need to spend less time trading and more time developing my skills and strategies.

Back to the positions at hand. From Figure 1, SRS is at the bottom of a long term down trend. Stop is \$30. Target is \$41. From the look of it, SRS will be going down even further if the market can hold its ground above 850. However, if the market fails to climb up, then yesterday's slightly higher low than Monday is a small plus point for SRS.

Update: Interestingly, in today's news U.S. Foreclosures Jumped in March and General Growth Files For Bankruptcy: Report. The 2nd news came in the middle of the night. And it's nowhere to be found unless you really look for it. I only read about it from CaraCommunity. For one of the largest REIT to declare bankruptcy, you'd think it'd be all over the news. Doesn't take a genious to figure this incident is deliberately hidden.

[caption id="attachment_1241" align="aligncenter" width="500" caption="Ultrashort Real Estate ETF"]Ultrashort Real Estate

My USO position is faring better, although it's merely hovering above my entry price. Now that the April roll over of USO is complete, the downward pressure on USO should be gone. Even during the roll over, USO has managed to remain above its upward trendline. This is definitely a big plus.

New stop is \$28.80 and conservative target is \$32.

[caption id="attachment_1242" align="aligncenter" width="500" caption="US Oil Fund ETF"]US Oil Fund ETF[/caption]

Posted 16 April 2009 in trading.

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