It’s time to take profits on our pre-holiday oil trade.
Shares of United States Oil Fund (USO) are up 14% since we wrote about this trade three weeks ago. The stock has hit the minimum upside price target we pointed to last week.
Independence Day is just a few days away. And, since that holiday often marks a short-term peak in the price of oil, now is a good time to take the gains and move to the sidelines.
Of course, oil could still move a bit higher from here. And by selling USO today, we might not be pocketing the maximum possible profit on this trade.
But, this is one of those situations where it’s probably better to leave the party early than to hang around too late.
Look at this 60-minute chart of USO…
As USO has been moving higher over the past few sessions, the MACD momentum indicator at the bottom of the chart has been moving lower. This “negative divergence” is often an early warning sign of a change in trend, or at least a pause in the rally.
This is a 60-minute chart. And patterns on this chart tend to play out within several days. So, this pattern may be foretelling of weakness in the price of oil prior to Independence Day.
Why stick around to find out?
The price of oil has gone up just like we thought it would, and in the time frame we were expecting. USO has reached our upside target. This trade has played out pretty much as planned.
Let’s leave the party a little early, and exit the oil trade today.
Best regards and good trading,
Jeff Clark
P.S. I have an announcement to make…
On July 11 at 2 p.m. ET, I’m going live with my next Open Line Q&A. There you’ll be able to ask me any question you have about option trading, technical analysis, or my outlook on the markets.
We’ve done a number of these Q&As over the past couple years, for subscribers only. But, this time, we’re opening it up to anyone interested in learning to trade options. As I’ve been saying, I think it will be a crucial skill to have when the market turns later this year. And I want you to be prepared.
To get your questions to the top of the list, submit them in advance to [email protected]. I’ll send you more info on how to access the Q&A next week.
Reader Mailbag
In today’s mailbag, a new Jeff Clark Trader subscriber gives Jeff a big “thank you”…
I’m a brand-new member of your Jeff Clark Trader service. First, I want to THANK YOU for making this service available at such a reasonable price… $19. [Click here to learn more about a Jeff Clark Trader subscription.]
I like the way you trade. Like you, I am a trader, not an investor. I like technical analysis and I think it has great merit. So, it “rings a bell” with me when you show your analysis on charts. It’s sensible to me. You are open and generous with your thoughts and ideas, and that generosity formed a truly positive picture of who you are as a person…
I like the way you write. I have been a subscriber to your Market Minute for some time, and I REALLY appreciate that you make that available to us “unwashed.” The Market Minute is what impelled me to subscribe to Jeff Clark Trader…
I am so grateful to you for making it possible for me to join one of your services…
– Dan
Have you been trading oil? How did your “pre-holiday” oil trade turn out?
Let us know, along with any other trading stories, questions, or suggestions at [email protected].