Greasing the Slide Lower
U.S. Oil Fund - USO - close: 32.60 change: -0.27
Why We Like It:
There are pockets of strength but for the most part the global economy is slowing down. Europe is on the verge of a double dip recession. The U.S. appears to be headed for another dip. China may have gone too far in trying to cool off their red hot economy. What does that mean for oil? Another recession should mean less demand!
The USO oil ETF has broken down. The oversold bounce has reversed. I suspect this ETF will breakdown to new relative lows over the next few weeks. I'm suggesting bearish positions now with a stop above the recent June high (stop loss: $36.15). Our first target to take profits is $28.00. Our second is $25.25.
Keep your positions small to limit your risk.
The United States Oil Fund LP is a domestic exchange traded security designed to track the movements of light, sweet crude oil ("West Texas Intermediate"). USO is a commodity pool organized as a Delaware limited partnership that issues units that may be purchased and sold on the NYSE Arca. The investment objective of USO is for the changes in percentage terms of its units' net asset value ("NAV") to reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract for light, sweet crude oil traded on the New York Mercantile Exchange (the "NYMEX"), less USO's expenses. http://www.unitedstatesoilfund.com/uso-details.php
(source: company press release or website)
Use the 2011 or 2012 January PUTS (Entry point - now, at current levels)
BUY PUT 2011 JAN $30.00 strike (USO 11M30.00) current ask $2.52
- or -
BUY PUT 2012 JAN $25.00 strike (USO 12M25.00) current ask $2.81
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