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EUO:EUR Bearish Setup

Reason:

Potential weekly Hammer candlestick (In addition a long tail below the lower BB favours selling exhaustion).

In the weekly chart we can see an almost done reversal candlestick (Pending today's eod print).

EUO Weekly Chart
Larger Image

I am not saying that we have a major bottom in our hands since the down-trend will not be jeopardized as long as price reclaims the 10 wma = 17.17 and the trend line resistance in force since the July 2013 high is breached.

In the Technical front:

  • The positive divergence of the weekly MACD could be suggesting a possible bottoming phase but it remains with a bearish cross hence the expected rebound should be considered a countertrend move.

In the Sentiment front:

  • Nor USD bearish sentiment has reached an extreme yet:

USD Sentiment Chart

In the daily chart we can see yesterday's impressive Engulfing candlestick. This type of candlestick rarely fails to confirm at least a short-term bottom

Obviously I don't know where the assumed rebound will top. The stochastic is crossing from oversold territory so if a large bounce is in the cards it has plenty of room until reaching the overbought zone.

At the moment I can just say that a shallow rebound should reach at least 16.90.

Above here we have a potential target box (Probably the gap fill at 17.09 could be a magnet).

EUO Daily Chart
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Lastly the 60 min chart where we can see an unusual huge candlestick. Probably in this time frame this move is a bit extended.

Provided we get a pullback today I am a buyer on weakness.

If today we get a pullback I will probably watch 3 potential entry zones: 200 ma = 17.12 // 0.382 R = 17.05 // 0.5 R = 16.95.

EUO 60-Minute Chart
Larger Image

 

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