USO Bullish: Long 12mos - 24mos Volatile Stock - Invest Smarty!

3 de mai. de 2020

USO
The U.S. largest oil fund has come under fire as of late. USO’s recent actions to cushion the blow from a historic sell-off in oil markets hit by oversupply and a coronavirus-induced plunge in fuel demand have brought about doubt if the fund can still meet its investment objective of reflecting the spot prices of oil. The fund has been trying to mitigate potential losses from falling crude prices by spreading its holdings through contracts expiring in July, August and September. USO said, "The inability to closely track the benchmark oil futures contract, the changes in its portfolio of investments and the impact of higher levels of contango, will impact the performance of USO and the value of its shares."

Many investors have bailed on USO as they understood more about contango. A Seeking Alpha article that described the perils of the futures roll when longer-dated contracts are more expensive than near-term ones. Understanding this motivated many investors to find exposure to oil futures that don’t expire anytime soon such as the United States 12 Month Oil Fund LP (USL), which contains further-out contracts or Invesco DB Oil Fund (DBO).

Taking into account everything that has occurred over the last few weeks, USO's stock has slightly climbed after executing its reverse split and as oil prices are recovering. You must recognize that the USO fund managers are in survival mode right now and doing everything they can to keep the ETF afloat. USO’s portfolio was moved away from the front-month contracts, which they did ahead of everybody else. As the world continues to battle the COVID pandemic, social distance restrictions are beginning to loosen. However, the recovery for oil will be slow. Oil traders believe it’s likely to take more than a year, and perhaps much longer, before global demand reaches the pre-pandemic levels of roughly 100 million barrels a day. But our world is still heavily reliant on fossil fuels as it is the world's primary energy source. Oil is the world's primary fuel source for transportation and the United States is the world's leader in petroleum consumption. So as the U.S.'s transportation activities recover, so will the USO ETF.

My chart analysis sees the stock hitting $32 by January 2021 and expecting to trade above $60 by 2022. I obtained positions in USO when in the stock bottomed out prior to the reverse split and possess several long options at $1.50 & $2.50 calls ($12/$20 with reverse split conversions) that set to expire in 2022.

Be effective and trade smartly my friends!

I am not a financial advisor. The advice here given is not financial advice even though my excitement might make it look like such. Trade at your own risk and remember nobody can guarantee you results. I conduct analysis and make informed decisions on what I believe is right and at the end of the day, I am just a person, not an expert. Again, this is my belief, a belief of an ordinary man, who just works hard and enjoys the pleasures of swing trading personally.

Darell

9 de mai. de 2020

Nota

9 de mai. de 2020

Nota

Price is not in the bullish zone. I expect the price to continue to drive up to the $34 level. Resistance levels are diminished and as COVID social distancing impacts are reduced, demand for oil will only help this ETF in long run.