Almost a Bottom in Oil

There is still no sign of a bottom on the oil daily chart (see USO below) but the massive falling wedge is reaching it's apex as volume picks up to levels not seen since the top. It won't take much for oil to break out to the upside and when it does the move should be substantial. As for targets, the 50 dma is more than a 50% gain from here and the 200 dma is a staggering 100% gain. With supply getting cut off and demand stimulus, its hard to see crude not moving higher from here. There are early reports that the collapse in gasoline prices is leading to increased demand from drivers and I'd expect to see more of that. If the US dollar weakens that will add fire to fuel.


Looking back at the 2003-2005 price action, $40 looks like it could be an area of significant support for crude. As you may recall, the low on Friday was $40.50, which I expect should be enough to bounce oil out of this wedge. A fellow trader Xerxes had a great idea in the double oil long DXO which has fallen to under $3.0, and I bought a good chunk of it today to add to some USO calls.

By the way, if crude does take off I would think the solars take the lead of any rally in US stocks. So on top of my USO and DXO positions I also have calls on JASO, SPWRA and ENER. Good luck out there!