Oil (UCO) - Short Term Bull - Swing Trade
Updated
UCO 
CL1! Here's the details of my trade Long on Oil (CL1!) - Position in UCO....
Daily Chart:
- Falling Wedge Pattern
- Break of Resistance Line Dec 11th
- Retest of Resistance Line 3x
- Inverted Head and Shoulders Formation
- Break above Inv H&S Neckline
Fundamental Support:
- TBH, for oil I rely 90% on the chart formations. Fundamental data for oil fluctuates nearly everyday, and can be difficult to pinpoint any reliable correlation between fundamental data and news to price movements
- However, major news/fundamentals are considered...OPEC announcements, wars and possible supply disruptions, etc
- For this trade, I'm solely looking at the chart and will mention in the comments if any fundamental data impacts the trade
Economic Data & News
- Much news about China's economic stimulus and whether it will drive demand is still in debate. Recent news shows China's GDP will be 4.9% for 2024 and similar growth is expected in 2025. However, there's still a need for more time and data to truly see the impacts
- Trump's tariffs are in question as to what and if he will implement them and what impacts it will have on the US and other major countries. For this trade this is not relevant, but more information keeping on top of.
Target:
- Entry $69.50 CL1!
- Inverted Head and Shoulders
- Head $68.50
- Neckline $70.50
- Target 72.50
- Stop: A break back below $69.50
- Inv Head and Shoulders formation is 8 Days
- Estimated time of breakout move is 2/3 formation time therefore ~5 days to target
Risks:
- Low trading volumes during the holiday period do not support the transition to bullishness for oil
- Supply/Demand news that could have a negative impact on oil prices
- Economic data coming from China that stimulus is not working and growth is continuing to slow
- Failure to hold above the Inverted H&S neckline
Overall:
Oil is not my favorite asset to trade due to fluctuating news releases and the difficulty of interpreting the supply and demand. However, the breakout of both a falling wedge and inverted head and shoulders are both high win % patterns...74% and 89% respectively, that I have taken a small position in my portfolio because the opportunity is there and it challenges my trading and depth of knowledge in oil.
My Position:
1 Call Option in UCO (2x Ultra Bloomberg Crude Oil)
$25 Strike, Current Price $27.55
Expiration Friday Jan 10th
Average Price is $1.65 a contract
Investment $165
Target $2.65-$4.65 (1-3:1 Profit Loss Ratio)
Stop .80
Potential Loss -$85
Potential Gain $100-$300
Trade closed: target reached
A great move today on CL1! and UCO. CL1! moved up to $73.50. I planned to continue to hold the position with the momentum higher, however after my review EOD, a red topping tail formed on the 4hr chart with relatively high volume and RSI of 75.
This does not mean it's going to turn downwards, with the momentum Oil has and the pattern formation there's a good chance this red topping tail won't be an issue. However, my option is a week away to expiration and I only have 1 option with my position. Typically with multiple options I would take profit here and sell 1/2 and hold the balance of the position with a stop at breakeven. However, with one option and the topping tail formation while nearing expiration I decided to take the 2:1 Profit.
I sometimes remind myself....doubling your money in 7 trading days....if I can continue to do that ongoing, my portfolio will increase exponentially.
Close Position
1 option sold at $3.32
Gain: $165
2:1 Profit/Loss Ratio
Target Achieved
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