Oil Looks Toppy to Me - Starting Ultrashort Oil & Gas (DUG)
This type of run simply looks overextended and toppy to me - I believe sooner rather than later (probably within a week or two) we are going to see a sharp reversal in oil to the downside. And it will take the commodities with it. Things have now moved to purely speculative mode - who else is left to buy and who is not on this train? I doubt very many....
I am going to buy Ultrashort Oil & Gas (DUG) as a "trade", not investment. This ETF has destroyed so many people but when it reverses I believe it will be powerful (this does not short oil directly but shorts a whole bunch of exploration companies) And yes, I am still a huge bull for the long term, but nothing straight up (or down). Parabolic moves get me thinking in a contrary nature. We appear to be nearing that stage, and I believe the the risk/reward is in my favor.
I am going to buy here in the $25.90s and see if we can sell it for $30+ within a month (that would be a nice 15%). Heck this ETF was trading there last week, so we might get it even quicker. I reserve (up to) 10% of the fund for "trades" rather than investments, so this is the first one we have had in a while.
I bought 1200 shares, creating a 2.5% stake. I'll probably be the only guy in America with this position, which makes me even more bullish ;) If you want less risk I suppose you could buy a refiner or airline here which also would spike if/when oil retreats.
I tried this once before in October so you can find more information about the ETF by following this link [Oct 23: New Short Position - Ultrshort Oil & Gas (DUG)]
Long Ultrashort Oil & Gas in fund and personal account
11 comments:
**Oil Looks Toppy to Me - Starting Ultrashort Oil & Gas (DUG)**
Leveraged short on oil & gas, the sector delivering 50% of S&P earnings this quarter and making up 15% of its market cap?
Goes well with that DHI long position I guess...
Gotta trade against the crowd sometimes.
EIA 10:30am
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.4 million barrels from the previous week. At 320.4 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories decreased by 0.8 million barrels last week, and are in the lower half of the average range.
.. but dont let that distract you from the chart patterns.
Mark, just wondering - why today? Today looks alot like yesterday.. except that we are getting follow through on the selling in the broader market. I think that can trickle into the commodities sector. Is there anything else? Or is enough, enough?
Did you just say "buy an airline" (?!!!) Wow! ;)
RMJ
I never catch the bottom or the top. I try to catch the middle
I think 25.90s will allow me to catch the middle when the reversal happens. I rarely have a position go my way the first day or two or even week, just perfectly.
If oil goes to $140-$150, I expect a major selloff in the stock market as they no longer can ignore thing. Of course CPI will show 0.1%
And when the market does a serious selloff even the energy names will go. SO I believe I will be protected that way
Remember when the selloff was most intense even the fertilizer stocks dropped 30% in a week. So what is "cute" today won't be so cute if oil goes $10-$15 higher. People will finally admit it "might be a small issue" (I believe)
I could be wrong. Depends on the Kool Aid. After all $190 oil would indicate strength in the economy.
20 May: "the futures curves for both WTI and Brent crude are quickly moving from backwardation to contango -- a very bearish signal."
http://tinyurl.com/5cm863
Thinking about selling my PBR calls.
Mark: I am looking at OII as a play on PBR and other deepwater rig induced demand for ROVs to make subsea connections, repairs, etc. Also, we have hurricane season around the corner and OII would be one of the biggest beneficiaries of any real damage to platforms and pipeline infrastructure in the Gulf...any thoughts?
Disclosure: This is not a recommendation for you to buy or sell OII since you can sue me if I give you advice ;)
I honestly think that the whole group just trades together - at this point you might as well throw in your hat with the ETF OIH
I like OII but if you put CAM, NOV, CLB, OII, FTI - any number, they are basically all tracking together.
But myself, I'd wait for a pullback and not chase these crazy moves. But that's me.
Mark, any thoughts on adding natgas plays on pullback?
be more specific. I don't know what exactly you are asking.
Would I add nat gas on pullbacks? yes.
if thats your question.
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