Earlier today Steve mentioned that he was waiting for a blowoff top in oil before buying DUG and asked if I had similar thoughts. If I did, I certainly wouldn't use DUG as a way to short oil b/c as I explained the other day DUG is NOT the inverse of the price of oil. If I wanted to go short I'd just short USO.
I've hated short-term trading of oil for years b/c it can be so nutty on an intraday basis. But if I were so inclined to play it and if I was still swing trading I'd certainly wait for some kind of topping pattern to form, blowoff or otherwise. And speaking of... USO looks like it's working on an island top reversal pattern:
We had a mixed market today with the Dow down, the S&P essentially flat and the Nasdaq and Russell 2000 up nearly 1%. The latter two indices are once again approaching their 200-day moving averages which have been so tough to stay above. I can't see them having a successful retest with volume being as weak as it was today though. It'll be good to keep in mind that this is a triple (or quadruple) expiration week, so expect some pinning games to kick in as the week wears on.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Down | Down | Down |
| Intermediate | Up | Down | Up |
| Short-term | Up(+) | Down | Up(+) |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
USO is not on my broker's Easy-to-Borrow list. Any other suggestions?
Thanks for settng me straight Mike. You rock! USO is a much better instrument for betting against oil.
Why not short CL? Try it, you might like it. Ties up little capital (be careful!), and is very liquid.
I've been trading both stocks and futures for a while now. In my experience, the personalities of stocks and futures are not the same, so I have different setups for each.
Just my $0.02