Discussion in 'ETFs' started by ccwells, Nov 14, 2009.

  1. ccwells


    USO is still struggling to get above its 233 EMA. It has actually come down from that resistance since the last update. There are reasons to believe that a change in trend has taken place.

    As just mentioned, USO is falling away from its 233 EMA. It tested with the island reversal surrounding the 11/4/09 top. The price bounced to retest it again but could not break above the resistance and the high of 11/4/09. It has however, broken below the lows of 11/2/09 and 11/6/09. It will be interesting to see how the 55 EMA holds up as support.

    The price has so far retraced 38.2% of the move from the 9/24/09 low to the 10/21/09 high, which cuts across support of the previous top of 8/24/09. I look for a decline to at least the 50% retracement and may even make the 61.8% in relatively a short time. This would put the price below the 55 EMA, further strengthening the case for a change in trend.

    I have placed Elliott Wave Count labels on a 60-minute chart for better clarity. As you can see, the decline from the 10/21/09 high to the low of 10/28/09 was a clear five waves down to complete wave I. The price action from there to the 11/10/09 high traced out an expanding triangle to complete wave II.

    Right now, I am showing an incomplete five waves down from the 11/10/09 wave II. If my count is correct, the price should continue to fall.

    How far will USO fall? Consider that if the price declines below the 11/13/09 low the next day or two it will complete wave v. However, that will be only wave 1 of III, meaning that wave III will be an extended wave. That would indicate a much more of a decline than I think most people expect. Time will tell.

    Could I be wrong in my analysis and Elliott Wave Count? Yes. What I have labeled wave I could be wave A of a corrective Zig-Zag pattern. What I have labeled wave II could be wave B and with one more push lower could potentially complete wave v of C, and therefore, potentially signal the end of the correction.

    What are the critical levels to watch for confirmation of one way or the other? First, Elliott Wave rules do not allow wave two to retrace more than 100% of wave one. In addition, if my count is correct, once wave 1 completes, wave 2 cannot retrace 100% of wave 1. In my count, wave 1 started with the 11/10/09 high. Therefore, the price cannot break that level.

    The price could potentially make one more move up Monday to the 39.60 level. However, I expect USO to decline to the 34 to 36 levels minimum to complete wave III. After that a small pause for wave IV before further declines in wave V.

    Whichever way you want to trade this setup, just remember the 11/10/09 high is the critical level to watch. As the pattern develops further, I will keep you posted of what we can expect.
  2. plan


    I'm not sure how effective it is to use charting for USO due to the contango issue. Best to chart CL I think.
  3. ccwells


    I am not trading futures. I am trading ETFs.
    ETFs have support, resistance, and chart patterns due to the participants trading the market just as it does for stocks, futures, or real estate. It is best to compare oranges to oranges.
  4. Dude are we looking at the same chart?

    <script type="text/javascript">var bfcParams = 'Symbol=OIH,TimeFrame=1-Day,NumberOfBars=100,WebChartID=690fca24-fb65-4c33-b63d-328f5e22b23d';var bfcWidth = '300';var bfcHeight = '250';</script><script type="text/javascript" src=""></script>

    The above chart is BULLISH!
    OIH is following the SPY, AUD/USD & EUR/USD perfectly.

    Don't fight the fed.

  5. ccwells


    USO has been trading sideways since 10/28/09. The price action is very choppy with overlapping waves. One thing I do want to point out is the fact that Oil has been in a corrective pattern since 2/9/09. That is a very long correction. Just remember that the main trend is still to the downside. We cannot get lost in the recent move and especially in what the media says.

    The correction looks to be a large Elliott Wave Double Zig-Zag pattern. The recent high of 10/21/09 could be very likely the end of the correction. If you have not figured it out yet, picking tops or bottoms is no cakewalk.

    As you can see in the 60-minute chart, I have labeled the wave patterns with Elliott Wave count labels. I have labeled three consecutive one and two waves. I have labeled them as waves 1 and 2, waves i and ii, and waves .i and .ii. Each wave two does not retrace more than the previous wave two. Each wave one is lower than the previous wave one and each wave two is lower than the previous wave two. All this indicates that a potential wave three is ahead to the downside and it should be a significant decline.

    I will discuss a potential alternate count so everyone will have all the facts and potential moves. Even this alternate count still indicates lower prices for the short-term. The alternate count will be where wave 1 = wave A, wave 2 = wave B, wave .i = wave C, and wave .ii = wave D. That means wave E yet to appear. If there is a wave E, it should form a three-wave pattern to the downside. After wave E is complete, you then can expect prices to make new highs for the year.

    TAZ traders will have conflicts with this analysis. The TAZ has been good support for a while for USO. If you are going to trade the TAZ, just keep a close eye.

    Volume has been very weak over the last three weeks. That means there has been low volatility with traders being complacent. If my first analysis is correct, look for volume to rise significantly along with volatility.
  6. ccwells


    This morning USO has declined below the 11/13/09 low, making a new lower low. It has also fallen below the lower parallel trend line shown on the chart. The price should retest the 34 price level at the minimum.
  7. CCWELLS, I will be looking.
  8. Isn't the entire USO movement lately been totally tied to US$. This means that anything and everything that affects the US$ is what is really affecting USO.

    Usage of oil demand has been lower than expected, and as a result the inventories are reflecting increases from time to time. But the US$ decreasing is helping the up move in the USO/Oil.

    US$ is what needs to be followed. The breakdown recently is not good news since it broke through the lower support. Is it going to 70-71-72? If it does USO continues to go up.

    What do you guys think?

  9. Fractal


    It broke through support because the entire market broke down due to (apparently) overstated worries about Dubai. Program sale.

    If you look at the volume profile for 11/27's move in USO relative to the last 2 weeks you'll see there was no responsive selling below support. It was thin all the way up until it recovered to the lows of the last few days. Sellers were not aggressive.

    The weekly chart also looks like a mature, rounded reversal.

    All that plus the relative strength in commodities makes me a buyer at those advantageous levels, for what it's worth.
  10. ccwells


    Kenny, I agree. However, I trade ETFs and I do not trade the dollar. In saying that, I do believe the dollar is about to move higher and of course, USO will move lower. I use Technical Analysis and trade accordingly and try not to allow my fundamental analysis bias get in the way. I have already recommended a buy in DUG and SCO.
    #10     Nov 28, 2009