The United States Oil (NYSE:USO) represents the largest crude oil ETF as far as asset management is concerned. It fell a whopping 0.83% at the open of the market today, staying in line with market analyst’s predictions. This is good news for bulls, but recent price activity may be indicative of a future sell-off. In addition, big overhead pressure pushing the market down is leading up to the makings of an oil drop similar to the one seen back in December:
Rumors out of China have showcased weak import/export figures for December of 2018, convincing many an investor that a global economic slowdown is at hand. The slowdown would lead to an inevitable reduction in market activity which would then lead to a decreased demand for oil, causing prices to flop.
Should prices close out below last Wednesday’s low, the next slide to the bottom could follow shortly thereafter. In USO’s case, that previous low was 10.69. Wednesday’s gap of near 3% could have possibly used up an excess of market energy for that single trading session, and Friday’s red candles are further evidence of it. Another red candle day today might be enough to plunge oil down to key support.
In the big picture, crude oil is still oversold, having lost 65% of its value over the course of the last decade. Even though it has slid down dramatically since the highs in October 2018, it’s still trading well.
In the short term, however, oil bears may be looking at a nice opportunity to snatch some quick gains in the wake of China’s economic distress.
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