Do You Want to See Some Magic?

Come to think of it, it would indeed be a masterful trap by Mr. Market for crude oil to stage a false breakdown and subsequent sharp upside reversal under the shadow of the Trump/Comey/Brazil headlines this week, with plenty of large Wall Street players off in Las Vegas at the SALT Conference, to boot. 

Indeed, with just a week before Memorial Day weekend kicks into gear, "black gold" looked horrendous late-last week, with the USO ETF breaking down below well-defined trend support dating back over a year (the daily chart, below, illustrates this point). 

However, crude benefitted from some OPEC news flow this week and is suddenly back inside that year-long range. Beyond that, energy bulls seem to be galvanized and are pushing higher yet inside said range, perhaps showing the early signs of a devastating short squeeze underway. 

We know energy stocks have been remarkably weak for a while now, frustrating even the most levelheaded of bottom-fishers. Thus, a long overdue relief rally in the energy complex should not come as much of a surprise at this moment in time.

The true test will be gauging the sustainability of this bounce, with participation from ancillary energy complex plays such as solar names FSLR SPWR, as the core energy stocks would presumably build on these initial gains. 

Either way, in the face of the pounding equities took earlier this week amid significant headlines, crude bulls finally pulled off some magic when they needed it most and will apparently live to fight another day back inside a massive range.