LINEAR REG CHANNEL

Oil, All Dried Up

04/14/09 09:03:38 AM

by James Kupfer

The uptrend in oil appears to be all dried up.

Security: USO
Position: Hold

On March 25, 2009, I suggested that traders exit their long positions in USO and consider shorting the popular exchange traded fund (ETF). On March 26, USO peaked for the month and dropped sharply below the linear regression channel. See Figure 1.

FIGURE 1: USO, DAILY. The blue oval shows where USO failed to remove its uptrend. The trend is over for at least a while now.

Graphic provided by: Wealth-Lab.

While I had thought the bottom of the linear regression channel would hold, that was not to be the case. Instead, as determined by almost any measure, USO closed decisively below the channel. It then proceeded to jump back to the bottom of the channel but failed to break above it. This is a relatively common occurrence I have seen referred to as "kissing the channel goodbye."

Indeed, USO began to move back down shortly afterward, although it did stay above the recent previous low. Given the break below the trend channel, it is likely that USO is going to go through some type of downtrend or at least a consolidation phase that should last no fewer than two weeks.

James Kupfer

Mr. Kupfer is a market professional and amateur stock market commentator. Disclosure: It is likely that Mr. Kupfer has or will enter a position in any security he writes about.

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Date:�04/15/09Rank:�5Comment:�

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LINEAR REG CHANNEL

Oil, All Dried Up

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