Monday, February 9, 2009

USO Undercut!

Interesting trading day in USO on Friday- That is to say interesting in terms of price and volume. First off, volume topped off the day at a whopping 67,685,773. Highest volume day (that I can find) since USO started trading back in April 10, 2006. Now, volume in and of itself isn't the end all be all. You need to assess volume in correlation with the price action to get a better perspective. On Friday the USO had a small 'undercut' of it's support level around $28.00.

Typically when a stock takes out support, it triggers existing sell stop orders that have been strategically placed beneath support, as well as short sellers jumping in to exploit an expected breakdown in price. It is therefore significant that the USO was able to rally back above it's 'broken support'.

Now, the candle formation wasn't perfect. Rather than closing at the high of the day and forming a bullish engulfing candle pattern (which would have been a VERY bullish scenario), the USO did give back some of it's intraday gains.

If the USO is able to break above Friday's high, that may signal a short term upswing in the price.