I previously highlighted the high-volume decline in oil back on September 20 (link here). I was taking a look at the chart earlier today, and I believe that oil is setting up for, at least, a 10% decline, maybe more. The following two charts show the United States Oil Fund (ticker USO, which seeks to track the price of West Texas Intermediate) and Oil per my charting service.
What is peaking my interest is the technical setup on both the USO and oil. We had two large volume declines in the last month, first on September 17 followed by a larger decline on the 19th. The price has rebounded somewhat since the near-term bottom on September 26. This rebound has occurred on weakening volume trends, indicating lackluster demand as the price runs into the supply lines. Not only that, but the price on both the USO and oil are bouncing off the 200-day moving averages, which appear to acting as resistance levels. This is while the momentum, as shown in the MACD, has turned negative. Provided this volume/price setup, it is my opinion that oil will likely close the June 29 gap. This is about a 10% decline from current prices.
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