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Profit From Falling Oil Prices

by Sam Collins 09/29/09

ProShares UltraShort Oil & Gas (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.

DUG Chart

Chart Legend

Since the bottom in crude oil in early March, this double inverse ETF has been in a steep decline. Recently, though, crude oil has shown signs of turning down. And if it continues to decline, DUG could be a good speculation.

However, with the exception of a buy signal from the Moving Average Convergence/Divergence (MACD), there is little to indicate a top in oil.

Nevertheless buyers at this level could get a trade to the 50-day moving average at $16, and then the downtrend line at $19.

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