I've been patiently waiting for an opportunity in crude oil to present itself and I believe that time is now upon us. As you know I've been bullish on crude oil since February and since then oil has risen nicely but has also pulled back.
If you look at the above chart you will notice a rather large and symmetrical inverse head and shoulders pattern taking place in the oil market (USO). Head and Shoulders formations are one of my favorite trading patterns... the shampoo is not bad either. For those of you who are not familiar with this pattern let me simply say that the above formation is considered very bullish once confirmed.
In the lower pane is the OBV indicator and it has already broken above its trendline which I consider to be an early clue that this market wants to go higher. The head and shoulders pattern will be confirmed if USO can close above its trendline. Its very important to wait for this confirmation. The protective stop will go right below the right shoulder. Whatever the distance is from entry to below the right shoulder is what your risk will be for this trade. As always, let's see what happens!
Thursday, April 30, 2009
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