You may remember from past posts that I have had a short in oil (via the United States Oil Fund, ticker USO) in the Short-Trading Portfolio. I was looking at the chart earlier today and I think the short thesis remains valid. The recent chart for the USO is shown below.
Since hitting a low on December 10, the USO has rallied by almost 8%. To me, this seems like a counter-trend rally without a broader a decline. The volume on the upside has been weak, a negative signal that there is little conviction to the upside. Now, the price of the USO is running into the late October downdraft, where significant downside volume came into the market. I would suspect that we will see a failure in the oil market in or around this price level, and note that if the operators do push it forward further the price/volume characteristics gets even more negative with the September downdraft. This is within the larger context of an oil market that is well supplied.
No comments:
Post a Comment