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USO Swing Trading Update

Viking Analytics profile picture
Viking Analytics


  • We hit our target near $47/bbl and sold our position in USO before today's sell-off.
  • We provide an update on key levels and indicators that we are following.
  • We believe that crude oil will recover again before continuing the downtrend.

Last week, we wrote an article which outlined our current trading plan and levels for the United States Oil Fund (NYSEARCA:USO). On Monday, crude oil had broken out of a trend channel that we had drawn, and was also near our stated target of $47/bbl, so we sold our position in USO at $9.61.

Today, July 5th, crude oil has sold off and USO has fallen to a level near $9.30, and we are studying current levels to see whether or not to re-enter USO with a long position.

The daily trend for crude oil is undoubtedly going lower until proven otherwise. Here is the current status of the Viking Crude Oil Matrix, a summary of indicators that we follow to determine our long or short positions in crude oil and USO.

On the daily chart, USO is near the 20-day moving average which also is the midpoint of the Bollinger Bands.

Since USO trades in lock-step with the front-month crude oil contract, we pay closer attention to it than we do USO. The crude oil contract is far more liquid than USO and USO is therefore a price-taker of the value of NYMEX crude oil. It is also important to note two key events for this week:

  1. The USO contract will roll over its front-month holdings of August crude oil (CLQ2017) to September NYMEX crude oil (CLU2017). The roll dates will be from July 6th through July 9th, 2017. At the moment, the term structure of crude oil is relatively bullish, with the premium for the second month being only $0.23/bbl more expensive than the front month. This $0.23/bbl premium is less than the cost of one month's storage.
  2. The EIA inventory report will be published tomorrow morning, July 6th, at 10.30am rather than the usual Wednesday morning at 10.30am.

This article was written by

Viking Analytics profile picture
Systematic and quantitative analysis.Rob McBride has 15+ years of experience in the systematic investment space and is a former Managing Director at a $14 Billion hedge fund. Rob has deep experience with market data, software and model building in financial markets. Erik Lytikainen has 25+ years of experience as an entrepreneur, business developer and financial analyst. He founded Viking Analytics in 2015 after selling a commodity production & trading company he co-founded in 2006.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in USO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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