USO , huge discount
- Thread starter Nasdaq5048
- Start date
USO closed today at $54.70 off a strong oil rally up $1.91. Looking to get long here. I am not convinced that this is the bottom of the sell off. However a close over $55.00 would signal a long entry. I am long at $54.22. The stock did close over its 20 day exponential moving average which is $54.42.
I will trade a hypothetical basket of 100 shares, add or subtract as fits your account parameters. Here is a link to the weekly rule explanation by Richard Donchian. This simple system was created circa 1970. I am sure that this and similar systems have been around much longer. This is also the basis for the Turtle system.
Here is the link for the weekly rule:
http://www.investopedia.com/articles/technical/02/052102.asp
I will trade a hypothetical basket of 100 shares, add or subtract as fits your account parameters. Here is a link to the weekly rule explanation by Richard Donchian. This simple system was created circa 1970. I am sure that this and similar systems have been around much longer. This is also the basis for the Turtle system.
Here is the link for the weekly rule:
http://www.investopedia.com/articles/technical/02/052102.asp
Having reread the article on Investopedia, I don't think it does a great job explaining the system. The system is a breakout system. There have been many over the years and there is an almost infinite variety. The 5 and 20 system is a good simple moving crossover system as it gives an entry and exit. A lot of techniques get you in a trade but not out. When the 5 day moving average crosses the 20 day moving average, then buy etc. There are many posts that cover this. I am using a daily time frame as this is a fairly new issue. The weekly signal is sitting way up at $62.00; if you are conservative one should wait for that. That may not happen till spring or at all. On the daily chart the last sell signal was given around $70.00 and is still short.
Its important not to take a signal unless there is good reason
to do so. I will wait for a crossover close and the daily parabolic stop and reverse to signal long.
Its important not to take a signal unless there is good reason
to do so. I will wait for a crossover close and the daily parabolic stop and reverse to signal long.
I was explaining about gold oil correlation and thought I would mention it here briefly. Gold and oil have had a long term correlation of around $15.00. Meaning one ounce of gold historically is worth around $15.00 barrels of oil. Spot gold as of this post is about $600.40, divided by the current spot price of oil (I will use friday's USO close here) is $600.40/$54.15 = $11.09. So an ounce of gold will cost us $11.09 barrels of oil. What does this have to do with the price of beans? Well if you look at the chart you will see gold(GLD) and oil(USO) cross twice so far this year, keep in mind that at the cross a barrel of oil is 10 times that of gold (in the GLD etf, a share of GLD is 1/10th the spot price of an ounce of gold). The problem with correlation is there is no guarantee that they will merge, diverge, stay the same. I would say that in the past six months that oil is leading gold. That may change, gold may lead oil. I would not recommend trading strictly off this unless you know how to arbitrage or pairs trade. The point here for gold traders is that if oil is down $2.00 and gold is up $5.00 look out, you may see a plunge in gold. If you look at the chart after the last cross gold rallied and oil is still cheap via their last cross. This does not mean buy oil, but be aware how markets are interrelated. Good luck!
There is a good divergence currently between gold and oil. I call it Murphy's law. I will sell 100 shares of GLD at $60.00 and buy 100 shares of USO at $52.05. This will be a short term play, I am looking for gold to sell off and oil to rally. The highest average true range for USO is about $1.70 on a daily basis. So I will use a
$2.00 stop for some cushion. I am looking for the divergence to become convergence. Total risk on the trade -$400. Will use a discretionary exit.
$2.00 stop for some cushion. I am looking for the divergence to become convergence. Total risk on the trade -$400. Will use a discretionary exit.
Going to cover GLD at $59.60 for a profit of $.40 or $40.00. Will keep the long position on USO. USO may not bottom till after the elections. I am long at $52.05 with a stop at $50.05. Oil is somewhat risky now as the trend is still down. Hoping to cover with a short profit. As an aside, Eric Bolling recommended the exact opposite trade yesterday. Buy GLD sell USO. Anyway, our money is as green as his. Only time will tell where oil will go. 
By the way someone mentioned on another board that he suspects that the Saudis may be flooding the market with oil to push prices down. This argument makes sense as even the average american citizen is doubtful about oil's amazing plunge. I know, I know supply vs demand, blah, blah, blah. Just a theory.
By the way someone mentioned on another board that he suspects that the Saudis may be flooding the market with oil to push prices down. This argument makes sense as even the average american citizen is doubtful about oil's amazing plunge. I know, I know supply vs demand, blah, blah, blah. Just a theory.
Are you sure you want to stand on the opposite side of Bolling? He has been doing this for 20 yrs and has proved he has made consistent profit in commodities.
I am not sure about his stock picks, but i am sure he knows what he is doing in commidites. Just look at his buy corn recommandation when corn was at 2.50.
Just a little thought, if you are trading the gold/crude spread, why are you liquidating the gold position? Now you are directional trading long oil which is making a yearly low.
I am not saying ur position wont be profitable, but just a little opinion of mine.
I am not sure about his stock picks, but i am sure he knows what he is doing in commidites. Just look at his buy corn recommandation when corn was at 2.50.
Just a little thought, if you are trading the gold/crude spread, why are you liquidating the gold position? Now you are directional trading long oil which is making a yearly low.
I am not saying ur position wont be profitable, but just a little opinion of mine.
Cover USO at $52.15. total profit was $.15 or $15.00 on the USO trade and $.40 or $40.00 on GLD. As I said the trade was in and out, and yes I was worried about oil as the trend is down. Total profit $65.00. The trade was made to show that one could possibly profit from the divergence of USO/GOLD. My point about Mr Bolling is that he pointed out the opposite trade, which probably could have been closed for a profit, as well, due to USO being down big today. The comment was not meant to disrespect him, I am sure he could trade circles around me, although I think when somone suggests a trade the time frame should be more specific as to exit. I did not plan to be in more than a few days. The point here is more about gold, USO or oil is still clearly in a downtrend although it appears to be closing strong. This is not a favorite trade, to me this trade is like a parlay card where you have two chances to be wrong. I would like to hold USO for a recovery but am flat on this trade. I do have USO in a long term account at $54.22.
let's revisit the previous trade which was closed for a small profit. There is a $10.00 difference between GLD and USO. Buy 100 USO
$52.05 and sell 100 GLD at $62.05. There is a simple $10.00 difference here. I am looking for this spread to narrow. Will use a two point stop on either side, total risk. -$4.00 or $400. Gold has seen a nice rally. Let's see if the divergence narrows.
$52.05 and sell 100 GLD at $62.05. There is a simple $10.00 difference here. I am looking for this spread to narrow. Will use a two point stop on either side, total risk. -$4.00 or $400. Gold has seen a nice rally. Let's see if the divergence narrows.