Wednesday, May 21, 2008

NO Reason To Be Long Here

I was long QCOM in the morning, nice trade. I was later short DUG(short oil etf) because I thought oil was going up.I made a half buck. I shorted UYG (double long financials) because I thought financials would get wrecked. They did and I made over a a point. PACR hasn't made me any real money yet but look at the action the last two days in crappy markets. The Fed minutes revealed a lousy outlook that includes inflation and higher unemployment. Very nice.

For those folks trading DUG on a move down in oil-shouldn't it have been killed today? Yet it went higher with oil and closed at the highs. Odd isn't it? From the cursory due diligence I have done, DUG looks like a more correlated play on the action in XOM (Exxon). I don't have time now, but go pull a chart on DUG and XOM . Around 2pm XOM rolled over and DUG moved higher at the same time, Even with oil at the high of the day. That's why if I think oil is going lower I just short USO. It worked well for me as a short earlier in the day because EXXON hadn't rolled over yet. Hope this tid bit helps because I couldn't understand the dynamic at all. I bought SDS (double short etf) around 3pm as I thought the bulls were scared shitless and wouldn't be in the mood to make bids. You know how it ended. Be smart and wait for more of a pullback.

As you know I borrowed USO to short. I never did it. Maybe tomorrow.


Anonymous said...

Nice observation on DUG. I watched it rally with oil and couldn't figure out why. Thought maybe the shorts were piling into it in anticipation of crude rolling over in the next day or so.

Very bizarre behavior for something that is supposed to be an inverse trade.

upsidetrader said...

been driving e nuts-been right on oils move in the past but DUG wouldn't cooperate-need more due dilly on this one-USO only pure play IMO

Anonymous said...

DUG(ie)is still a 2:1 on inverse(supposed to be)and includes both oil and gas, USO is (1:1) oil only.........yet DUG still acts odd.........maybe like the old JPN, traded here in anticipation of what's coming tomorrow....anyway you cut it, DUG is ODD!!

Bot July 20 calls at 6 and will average in all the way to $150, oil........not quite a day trade though.......

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I am a former hedge fund manager, broker and capital markets dude who now trades for his own account. I love what I do. I will try to post some stocks and an occasional chart that looks attractive for entry.I will also try to point out the idiocy of conventional wisdom and the lack of value added by the mainstream financial media. These postings should not be viewed as recommendations.