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)"][/caption]
[caption id="attachment_1370" align="aligncenter" width="500" caption="US Oil Fund"][/caption]
[caption id="attachment_1371" align="aligncenter" width="500" caption="US Oil Fund"][/caption]
[The roll over every month of contracts put a severe strain on USO share price]: http://shockedinvestor.blogspot.com/2009/02/tale-of-uso-usl-and-contango.html