USO Oil Fund Threatens to Break Confluence Support

Dec 7, 2009: 12:45 PM CST

I wanted to highlight an interesting yet critical support zone for the US Oil Fund (USO) and – in turn – Crude Oil (similar chart).  If broken, odds will shift to favor further downside, but until then, let’s look at a critical confluence price area to watch going forward.

At first glance – if you cut through all the lines – price has broken under the expected first ‘line’ of support from the 20 and 50 day EMAs that are converging about the $39.00 per share level – that’s the precursor to a potential trend reversal in the works.

Look for any price rise above $39.00 to shift the structure back to bullish, but if not, then watch the lower price levels mentioned here.

The second ‘line’ of support comes in from the confluence Fibonacci support area at the $38.00 level – from the 50% retracement of the September lows and the 38.2% retracement of the July lows both taken to the October highs.

As of this writing (noon EST Monday), price is slightly underneath that confluence level.

As long as price remains under that level, the next support target is the confluence Fibonacci zone (cluster) as shown at the $36.75 level.

Needless to say if sellers can break beneath that confluence support level, odds would strongly be in favor of a move to even lower levels which could target prior support zones at $33.70 and even $31.50.

For now, let’s keep our eye on how price reacts immediately at the $37.00 per share level and beyond.

Corey Rosenbloom, CMT

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

4 Comments

4 Responses to “USO Oil Fund Threatens to Break Confluence Support”

  1. steoli Says:

    Look at the clean movement up in October followed by a very complex correction…. The trend is up.You can see also that this correction is followed by Divergences…
    I would expect an up response…

  2. Broken Andrews Pitchfork Grid on Crude Oil | Afraid to Trade.com Blog Says:

    […] Grid on Crude Oil Dec 7, 2009: 4:21 PM CST // Earlier this morning, I posted on USO in “US Oil Fund Threatens to Break Support.”  Let’s step up to see the Crude Oil Index ($WTIC) in StockCharts (prior to […]

  3. steoli Says:

    Look at the clean movement up in October followed by a very complex correction…. The trend is up.You can see also that this correction is followed by Divergences…
    I would expect an up response…

  4. Broken Andrews Pitchfork Grid on Crude Oil | Penny Stock Trading System Blog Says:

    […] this morning, I posted on USO in “US Oil Fund Threatens to Break Support.”  Let’s step up to see the Crude Oil Index ($WTIC) in StockCharts (prior to […]