Saturday, December 16, 2006

A Detailed Look At Oil ( USO)





I'd like to talk about a longterm trade I see setting up in oil. The USO ETF enables investors to speculate on the price movement of the underlying commodity--crude oil.
The ETF's benchmark is the spot price of West Texas Intermediate light, sweet crude oil delivered to Cushing, Okla., minus expenses. The USO will invest in energy futures contracts, cash-settled options and other instruments including short-term U.S. Treasury securities.

If you look at the above charts you will see starting from the top a monthly, weekly and daily chart of the USO ETF. Starting with the monthly chart (top chart) notice that this recent decline is very similar in price and time to the previous decline. The USO ETF is also at the bottom of a longterm channel and the stochastics are setting up for a major buy signal..

Now lets look at the next chart.. The weekly chart shows a very accurate 10 month cycle of lows which is due now..Notice how accurate these cyclical lows have been since 2001.

The bottom chart is a daily chart of the USO ETF. Notice now how we have our first sign of a possible bottom. Notice the higher high that we made this month and now we are making what looks like a higher low. IF USO can get above the 55.10 high, that would confirm the beginning of an uptrend in my opinion. What I am trying to do here is catch the longterm monthly buy signal by entering early with low risk using the daily timeframe. Let's see what happens...

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