US Oil ETF Poised for Bearish Break Out on Lower Oil Prices

3 thg 11, 2014

[1] USO has sky dived from $120 (off the chart), on July 2008, to as low as $23 in Feb 2009, signaling a very clear bearish trend.

[2] However from July 2009 until now, price has been consolidating sideways between $42 and $30, from July 2009 to June 2012. Subsequently, the sideways range narrowed to $39.40 and $30, from June 2012 up till now. All in all this sideways consolidation is has been going on for about 63 months now.

This is roughly a sideways Rectangle chart pattern, which is a pause in the bearish trend in [1], with a view to trade at lower prices.

[3] We observed that the latest price action, starting from 2014-06-25, is a developing Elliott 5 Wave pattern, with the price poised to break out on the down side to complete the fifth wave.
Therefore we project that a bearish breakout is likely to occur, should price trades below $30.55 over the next few trading days.

Break Out Condition:
When price trades below 30.55.

Stop Loss:
Above 31.55

Taking Profit:
Take Profit Target will be around $27.20, based on the low of 2009-04-20.

Risk:
There is always a risk that this a false break out, with possible support buying around $30.00.

References:
Rectangle Chart Pattern> babypips.com/school/middle-school/important-chart-patterns/rectangles.html
Elliott Wave> elliottwave.com/freeupdates/archives/2011/07/06/Using-Elliott-Waves-As-Simple-As-A-B-C.aspx

P.S. Sorry friends, I have not been writing new Ideas for a while, as I was working on my CMT Level 3 Exam.
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