USO Does Not Want To Give Up Yet

Even though the United States Oil ETF (USO) turned down where we expected it would this past week, the developments on Friday make me seriously question whether it will continue in its downside set up. 

On Thursday, I sent out an alert on USO looking for a wave 2 bounce.  While we certainly got that bounce, the rally can be counted as an impulsive structure rather than a clear corrective structure.  And, in order for me to even consider a short on this chart, I would need to see a solid set up to do so.  But, the one which has developed on Thursday and Friday is anything but a solid set up.

Not only did we get that rally which seems more like a 5 wave structure than a corrective structure, the drop off the high of that rally is also looking corrective, rather than impulsive.  Based upon the action seen on Thursday and Friday, it would seem that the USO wants to attack the 14.60 region again, which if broken through, points it back up towards the 15 region. 

So, unless the USO is able to break below the low struck on Friday – 14.11 – to even consider it as a leading diagonal to the downside, it seems it is set up to rally again to test the prior highs. 

USO 8min
USO 8min
Avi Gilburt is founder of ElliottWaveTrader.net.