Talk about a frustrating asset class. I don’t think anyone is happy and comfortable being in the oil space, bulls or bears. While the S&P500 has rallied to all-time highs off those lows 4 years ago, crude oil has frustratingly traded sideways this whole time.
Today let’s focus on $USO – the United States Oil Fund ETF. Since May of 2009, this oil fund has traded within a 16 point range between 29 and 45. Right now, they’re sitting somewhere in the middle around 34.50. The chart interests me for sure, but can this turn into a real breakout?
USO has built a nice symmetrical triangle since last summer: lower highs only to be met with higher lows. In April, oil prices fell below the lower trendline of the pattern, only to quickly reverse higher. That is signal #1 to us that prices aren’t ready to collapse. From false moves typically come fast moves in the opposite direction. So as far as we’re concerned, if that break was indeed a false move, then the fast move should theoretically be to the upside.
To start the new week $USO broke above a declining trendline from the September highs. This is the first time it’s been able to do that. Now we want to see a series of higher highs to go along with the higher lows. That confirmation level to us would be closes above those early April highs.
As far as price targets go, the base of this triangle is about 8 points. If this breakout above 34 and change holds, then you’re looking at a measured move up above 42. This level also coincides with the highs from March of last year. So this resistance level would definitely be our target after confirmation.
But knowing the way this guy trades, I wouldn’t be surprised to see it whip around a little bit before making trending decisions. I guess we’ll see. Either way, I think it’s interesting that the Energy sector (as represented by $XLE) is breaking out to new 52-week highs as Oil potentially breaks out in its own right. Although their correlations aren’t as consistently high as you may think (0.49 for year), they do have a correlation of almost 1 for the past quarter. This could continue…
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Bull Market Fridays With Pearls
Posted by JC Parets on May 17th, 2013 at 5:11 pm, Comments: 0
Bullish Sentiment Drops At All-Time Highs
Posted by JC Parets on May 16th, 2013 at 4:19 pm, Comments: 0
I always find it interesting when markets hit new highs and bullish sentiment simultaneously drops. I realize there’s a lot of noise in these weekly [...]
Price Targets In Unchartered Territory
Posted by JC Parets on May 15th, 2013 at 12:35 pm, Comments: 0
Andy Nyquist over at See It Market has put together a series of guest posts that he is calling Market Masters. I’m honored to have [...]
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Posted by JC Parets on May 13th, 2013 at 7:06 am, Comments: 0
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Posted by JC Parets on May 11th, 2013 at 10:53 am, Comments: 0
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Posted by JC Parets on May 10th, 2013 at 5:01 pm, Comments: 0
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Posted by JC Parets on May 9th, 2013 at 8:48 am, Comments: 0
Over the last couple of weeks we’ve started to see some rotation out of the defensive areas of the market and into some of the [...]
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Posted by JC Parets on May 8th, 2013 at 8:30 am, Comments: 0
Here’s something that doesn’t get talked about much these days: Gasoline prices, remember those? I think this is an interesting one. Today we’re taking a [...]
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
- Is This Crude Oil Breakout For Real?
- Bull Market Fridays With Pearls
- Bullish Sentiment Drops At All-Time Highs
- Price Targets In Unchartered Territory
- Why Hong Kong Has My Attention
- Are We Seeing Rotation or What?
- Interview With Technician Mark Arbeter
- Weekly Wrap Up With Dr. Phil
- This Pattern Has Been Working
- Can Gasoline Prices Rally From Here?
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