Today's bigger than expected drawdown in gasoline inventories despite the build in crude has sparked a powerful upmove in the US Oil Trust (AMEX: USO) in the aftermath of yesterday's weakness and today's lower open. Let's notice that today's action represents a potentially significant key upside reversal session, which would argue that the near-term direction has reversed to the upside (again).

Let's also notice that a few times in the past seven sessions the USO has attempted, but failed to hurdle key resistance between 52.25 and 52.60. A confirmed key upside reversal today will argue strongly that the USO will claw its way above 52.25/60 on the way to confronting its 9-month resistance line at 53.55.

Yes, I bailed out of my long position yesterday, but I am not yet ready to chase today's upside reversal…at least until I get some confirmation that a new upleg is in progress.

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By Mike Paulenoff

Mike Paulenoff is editor of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

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