DUG

[Leonidas]

A few weeks ago I was a centimeter away from buying some USO because I had given up fighting the trend in oil. Although I kept saying "it's topped", crude kept going like the Energizer Rabbit and I finally said "maybe it's time to buy". But I hesitated for two reasons: 1) I said the same thing in 2000 about tech when I got tired of seeing other undeserving individuals making beau coup dollars in stocks of companies that weren't making any money.* And, 2) I knew oil shouldn't be that high. Somewhere down the road maybe, but not now, not today.

So, while in the midst of this discussion http://www.early-retirement.org/foru...ver-36710.html I was ready to pull the trigger and get my feet wet with some USO, but that nagging little voice inside my head kept saying "No". And that's when I bought some DUG - not as much as I now wish that I had bought - as a short trade that I could get out of quickly if it went sour.

Here is the question I have this morning. I still think crude futures are too high at the moment and there are a lot of people that jumped on that train at the last minute as I almost did. If oil goes down, as it has been lately and as it is doing strongly this morning, some of those people are going to lose faith and bail, and if it happens enough oil will stop walking down the stairs and decide to take the elevator. I'm not saying prices will go into freefall, but my simple broad strokes style of trend line analysis makes me think that the price is really close to breaking support in a big way. Oil could go to 100ish and the USO down to below $90.

I'm considering buying some more DUG.

Your thoughts?


*I said that right up until the moment before I bought in (maybe it's different this time). Which was right before it all went to hell.

[Art G]

I'm betting that come election time, national gas prices will be under $3. Take what you wish from there.

[Band 1]

There used to be a poster that followed DUG. You can find the analysis at the following link.

Public Chart Lists - StockCharts.com

[Leonidas]

Originally Posted by Art G

I'm betting that come election time, national gas prices will be under $3. Take what you wish from there.

I've been looking at natgas with the intention of maybe buying sometime before winter. But I partly read something the other day that made it seem like it may fall even further based on increased imports. I'm going to wait a bit and see what happens in the next few weeks. I'm thinking that if it goes below $7 that you might be right, it could take the elevator down to the basement.

Originally Posted by Band 1

There used to be a poster that followed DUG. You can find the analysis at the following link.

Public Chart Lists - StockCharts.com

Way too technical for me. My charting is very broad strokes, 6 months plus timeline just looking at the lows to try and see if the trend is sustainable. I did like his comment on one of his charts: "This market is making me into a day trader". That's exactly how I feel.

[Leonidas]

Putin's invasion and a strong dollar seem to have the oil traders confused. No clear direction so far today, but the short term seems a wee bit bearish (I don't trust Vlad the Impaler) so I sold the DUG to lock in the profit and see what happens next. I'm a day trader now - I guess I'll go wash my hands right after I count my money.

[Jessica08]

If you are interested in finding more information about DUG you should check out DUG - UltraShort Oil & Gas | ETF MarketPro . The information there isn't too technical. Have you also looked at PXJ or DIG?

[Art G]

Let me rephrase from earlier, I believe that if McCain hopes to have a prayer, national gas prices will have to be under $3 per gallon. JMO

[Marquette]

I think the issue is that you said national gas but Leo heard natural gas.

[Art G]

Good catch.

[Leonidas]

Originally Posted by Marquette

I think the issue is that you said national gas but Leo heard natural gas.

Absolutely - good call. Time to go to the eye doctor or start using bigger fonts on the PC8)

Looks like national average for a gallon of regular is $3.81 today. On a brighter note, the prices have really dropped locally - the average for the metro area is $3.61, but I can buy it near the house for $3.37. I think I will see $3 or lower here sometime in September if this pace keeps up.

Which it might, given crude is down almost $2 so far today - guess I bailed from DUG a little early.

As for helping or hurting one candidate over the other. I guess high prices might help Obama in some voters' minds - those being the minds that aren't full of facts on how the energy markets work. Personally, I've looked at both candidates' plans (or this week's versions as they keep changing) and I wonder what their advisers are smoking.

[Art G]

Obama is pushing change. If the economy is stable come election time, people may not think we need change. If the market is getting slammed, Obama will win. Again, just my opinion.
BTW, heard from a pretty good source that Wall Street fears Obama winning and thinks it would be the worst thing for the market.
This is why I believe the President finds a way to bring down gas prices.

[Leonidas]

Originally Posted by Art G

Obama is pushing change. If the economy is stable come election time, people may not think we need change. If the market is getting slammed, Obama will win. Again, just my opinion.

I get the idea; it just doesn't make sense to me. But that's never stopped anyone before.

Originally Posted by Art G

This is why I believe the President finds a way to bring down gas prices.

Now there is a trick I would like to see.

Originally Posted by Jessica08

If you are interested in finding more information about DUG you should check out DUG - UltraShort Oil & Gas | ETF MarketPro . The information there isn't too technical. Have you also looked at PXJ or DIG?

Thanks Jessica, I had not seen the particular site but have found the same information it links to from other places.

I did not look at DIG or PJX. The original idea was to buy some USO for two reasons: 1)The upward momentum in crude prices seemed unbreakable in spite of common sense, and 2)USO actually owns oil futures contracts. The latter fact probably provides for less correlation with the market, but It seemed like an interesting trade to play along with the momentum, and I don't think I'll find a ETF that actually holds barrels of oil somewhere. (Plus I already own individual stocks that are in either the DIG or PJX or both.)

When I decided the trend was broken in crude's momentum, I realized that my holdings in oil services and integrateds were going to take a beating. The market has beaten me up enough this year and I started looking for hedges. There's not much of an anti-USO ETF, and I wasn't sure I wanted to short USO shares, so I looked at the short and ultra short ETFs. DTO (actually an ETN) seemed interesting, but in the end I chose DUG because it seemed like what I actually wanted to be hedging was risk on my oil services and integrateds and not the price of crude - and DUG made sense because its goal is to try to be the 200% daily opposite of the DJUSEN.

I will admit to not being very comfortable with owning DUG, but as a trade it worked out well.