USO: Bottom Is In; Buyers Are Returning; $4 Price Target

David Dierking

During last week's collapse in the oil market, many of the major oil funds were taking extraordinary steps to prevent the collapse in themselves too. The ProShares Ultra Bloomberg Crude Oil Fund (UCO) completed a 1:25 reverse split to save the share price. The iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) closed up shop altogether.

The United States Oil Fund (USO) did a 1:8 reverse split of its own. This one, however, captured more attention since USO is up to around $4 billion in assets and was the target investment of choice for those looking to speculate on oil prices.

But the changes that the fund's management team look like it might save the fund after all. The ability to purchase oil futures contracts out into the future is helping to improve liquidity and reduce risk, while the price split is keeping the share price above the key $1 level.

The crude oil market seems to have stabilized in the near-term somewhere in the $10-15 range (although prices have been falling on Monday). That's been enough to draw buyers back into USO.

USO's price has remained steady around the $2.60 mark for about a week straight. On top of that, the negative volume index appears to have also hit its floor.

sc-314

Volume has shot through the roof since the middle of March, but buying volume for USO down below the $3-4 range has started improving. Granted, it still has some ways to go before it approaches more healthy long-term levels, but it's certainly looking like the short-term bottom is in.

I'm anticipating a return back to the $4 area here over the next month or so as governments continue pushing to open up the economy and create some more demand for crude products.

If you liked this article/video, please click the LIKE button or share it on Twitter, Facebook, etc. using the buttons below.

Feel free to leave any comments, questions, or thoughts on the ideas presented here (and sign-up if you haven't already).

Follow me and receive periodic notifications when I post here by clicking the FOLLOW button at the top of the page!

Comments (18)
No. 1-5
mgara
mgara

hi david! what do you think about investing now in UCO knowing that is over $14,5?
do you think will keep going up?

ashleyo
ashleyo

Hey David,
I’m a newbie in shares & stocks. I just invested in UCO at $12 per share.Do you think there’s a chance it may go back in the $100-$200 range once things start opening back up?

Hennry
Hennry

look at the history of companies that have done reverse splits on declining price action... the future results are normally not impressive... do you think you are going to beat the odds this time? be realistic and please trade the odds in your favor

bsunds
bsunds

why on earth would you still be holding this. And no do not listen to this article its a joke. USO has not approached bottom whatsoever

Andy341
Andy341

Do you think UCO will recover too? I bought in before the 25:1 split at around $1.33(so $33ish). Trying to figure out if I can stay in and recover. Please let me know


Trade Ideas

FEATURED
COMMUNITY