Oil Taking A(nother) Beating

The U.S. Oil Fund (USO) has been a poor product almost from the get-go, as it struggles to track the price of crude oil while battling the long-term effects of contango.

With oil taking another beating today, USO is getting hit especially hard, off nearly 6% so far on Monday.

That has pushed the fund below its lower Bollinger Bands, one of the few technical indicators we regularly watch. It's a handy measure to see check how unusual a move is given its recent history.

It's unusual to see a fund trade at both a new 52-week (at least) low and below its lower Bollinger Band. It shows that traders are especially eager to purge themselves.


Figure 2 shows the returns in USO over the next days and weeks if investing $100,000 in USO when it closes at a 52-week low and below its lower Band.

Even during its mostly horrid history, the fund has had a tendency to snap back over the next 1-2 days. After that, not so much. There are some longer-term reasons to expect this move to be exhaustive (such as the latest Commitments of Traders data) but the price action so far is giving little comfort to those expecting it.


The post titled Oil Taking A(nother) Beating was originally published as on SentimenTrader.com on 2015-12-07.

At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.

Follow us on Twitter for up to the minute analysis of market action.

Not ready to signup up for a free trial yet?

Signup for our Daily Lite email to receive highlights of our daily report, research and studies.

Follow us on Twitter:

Subscribe to our Youtube Channel:

RSS Feed

Subscribe to the Blog RSS feed