Sam Collins

A High-Octane Trade: UltraShort Oil & Gas ProShares

by Sam Collins   12/16/08

UltraShort Oil & Gas ProShares (DUG) -- This Exchange-Traded Fund (ETF) seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Oil & Gas Index.

When a huge bull-market spike in July drove crude oil and other energy commodities to new highs, this ETF fell to new lows but within six weeks, it established a quadruple bottom with four Collins-Bollinger Reversal (CBR) buy signals.

On Oct. 3, with DUG at $45, the Trade of the Day said, "Since then oil has fallen and DUG has risen flashing one positive signal after another: Note the Gold Cross (50-day moving average over the 200-day moving average) in September, a stochastic buy last week, along with one of our own CBR buys. This chart has a near-term price object of $55 with much higher prices likely."

Almost immediately, crude oil prices fell sharply and DUG rocketed above $85.

Two weeks ago, crude prices reversed up but, with oil demand down and banks continuing to cut credit, oil and gas could be due for another fall.

Note the recent CBR buy signal on DUG last Thursday, Dec. 11. The near-term target for DUG is $45.

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Sam Collins is a registered, fee-based portfolio manager who may be contacted samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.