After seeing a strong push higher, oil is pulling back and trying to fill the gap left from August 26th.
Now I’m not ready to call this a failed breakout just yet, but the odds of a complete reversal here are low, especially if the tensions in the Middle East continue, as always…
Here’s a daily chart of USO
What I like here is a put credit spread in USO. This is a trade that profits if USO goes higher or at least doesn’t go much lower.
Here is the trade I like:
Sell -5 Nov 36 Put
Buy +5 Nov 33 Put
Credit: 0.50
Return on risk: 20%
If USO loses 36.50 we will unwind the position or roll the spreads out in time.