CAL's Inverse Correlation with Energy

Today I went short on CAL, an airline stock, and went long USO (U.S. Oil Fund). Most likely, this trade is either going to pay off handsomely or hurt badly. I don't see much hope for any middle ground, as the stocks have had an inverse correlation over the past month. Oil goes up, airline stocks go down, and vice versa. I probably should not have played two entries that are so closely tied to one another. However, the charts told me those were the moves to make, so I didn't talk myself out of the trades.

Take a look at this chart below comparing CAL to OIH over the past month (USO's move is very similar to OIH), and note how perfectly these stocks move against each other.

Today's Trades: CAL and USO

I re-entered a 500 share short position in CAL at $41.60. This is an aggressive play, as the stock has not yet broke the forming head and shoulders pattern.

I also bought 500 shares of USO at $46.80. My target is $50, which is just under the 50 day moving average. The MACD and RSI look good, although I am a little concerned about the lack of volume on this upswing, in relation to the volume on the downturn. My gut is telling me to ignore the volume trend becausethe increased volume on the downswing is a sign of capitulation (note that volume during the "meat" of the move was actually quite low), but only time will tell.

Trade Update: CAL

I was stopped out of CAL for no gain or loss (minus commission cost, which I don't factor on the site). I still think many of the airline stocks are setting up for a a fall, but it looks like they are going to bounce a bit before they do. I may enter again later this week.