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WHAT DOES USO MOVING AVERAGE CROSSOVER MEAN OVER NEXT FEW WEEKS?

Published March 25, 2017
4:05 PM

On March 24, 2017 the United States Oil Fund USO, 200 daily moving average crossed below the 250 daily moving average. Historically this has occurred 10 times. When this happens, the ETF drops a minimum of 0.151%, has a median drop of 2.214% and maximum drop of 10.623% over the next 10 trading days. This last occurred December 8, 2014 and the fund dropped 67.92% over 296 trading days until it hit the bottom.



US OIL ETF Chart From TradingView.com

When we take a look at other technical indicators, the relative strength index (RSI) is at 29.0332. RSI tends to determine overbought and oversold levels. I personally use anything above 75 as overbought and anything under 25 as oversold. The current reading declares the fund is nearing oversold territory, however, the fund recently hit the oversold level and is slightly heading upward from a 23.5711 level on March 14, 2017.

The true strength index (TSI) is currently -30.2018. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The current reading declares the fund is trending downward.

The negative vortex indicator (VI) is currently 1.3201. The VI determines current trend and direction. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The current reading declares the fund is trending downward.

Considering the moving average crossover, RSI, TSI, and VI levels, the overall near-term fund direction appears to be trending downward. Based on historical movement compared to current levels, the fund could drop 1.93% before turning upward again.

DISCLOSURE: I currently do not have positions in the fund mentioned above. I most likely will not enter a position within the next 72 hours. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. Make sure appropriate research is conducted prior to taking any risk in a marketplace.

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