Always a Bull Market Somewhere?

Tom Gentile

Posted in Technical Analysis

By: Tom Gentile on June 16th, 2022 • 4 mins read

The equities and bond markets are trading in a bearish trend. The markets are adjusting to a Fed that is a bit more aggressive in its fight against inflation and trying to stave off a recession and valuations are getting adjusted by this sell off.

This may be painful for many right now, but in the long haul this could be a forthcoming situation where we will be able to pick up stocks at bargain prices to where they are and were and for that we may be thankful – later.

Despite this decline, per the popular personality on a major financial news network whose moniker is there’s always a bull market somewhere, we will focus on the sector that IS showing positive upside momentum and that’s Oil.

Focus on the Charts and Prepare for Opportunity

When you find a sector that you feel is strong (or weak) you want to focus on technical analysis to find not only an entry opportunity, but projections for future price moves and THEN execute trade management.

We see that opportunity in the United States Oil Fund, LP, (USO). Per the yahoo finance profile this is what they have as a description for USO: USO invests primarily in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels.

One of our favorite technical patterns is when ‘Old Resistance becomes New Support’ (and it’s opposite).

This is where price breaks out of a price level that has been a price are the security has had trouble breaking through to the upside, but finally does. The security then sees the price come back to that price level, but then stalls and gets hung up for a time until more buying steps in and propels it higher.

We’ll comeback to that pattern in a minute.

What is an Up Trend?

An uptrend is defined as a security that looking at the chart shows prices from the left side of it to the right shows the price getting higher.

It does so in a manner where the pivot highs are getting higher, and the pivot lows are also getting higher (higher highs and higher lows).

There are many other formations that can happen in an uptrend, but so long as that price action just described is happening that security is in an uptrend.

52-Week High

An other thing one can look at is where the security is in relation to its f2-week high in price.

My online options analytic software www.tomsoptiontools.com has a tool where one can search stocks by what’s called the Hi / Low tool. It will show you what percentage of it’s 52-week high the security is at.

90% or higher means the security is within 10% of its 52-week high.

This is a sign of strength for the stock AND if one can find a stock at 10% of its 52-week high in a bear market that is what’s called Positive Relative Strength.

Look at the reading on USO from www.tomsoptiontools.com

Image 30

As of today, close it is at 92.65% or you can say it is within less than 8% from its 52-week high. That’s strength. Back to the Pattern Old Resistance becomes New Support:

Image 31
Figure 1: Old Resistance Becomes New Support for USO

One can look at a few more instances where UAO tested the price of 82 but looking more specifically at the closing price of the pivot high shown by the green arrow on the left and then looking at the low of the candle for today’s price, which signifies the low print price of the day one can see what may be a reason for the upward price action of USO happened after its recent little slide back in price.

One thing we like about this pattern is we can assess a potential price move higher. In this case up to at least the prior pivot high, but one also can consider the new support price as a technical stop in that IF the security does not trade higher and instead trades below that pivot low support price one can stop out of any trade one might be in.

App: Toms Option Tools

Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.

Other times I will have other charts may work to amplify my educational points. 

Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.

Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.