Oil is closing in on $40.00 and perhaps on the way to $37.50 amidst an increasingly acute oversold condition. The trendline created by connecting the two major rally peaks between September 2000 ($37.89) and February 2003 ($39.99) cuts across the price axis at 46.00-43.50. As the chart shows, a sustained break of 43.50 points to the $37.50 area next. Where will it finally find that acutely oversold, extreme downside price level? I don't know, but my pattern work off of the July high at $147.27 warns that it is approaching fast, a potential opportunity for ETF traders of the US Oil Fund (USO).



Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.