Oil and UCO Update
In mid-January of this year we were very bullish on oil while the world was ultra-bearish.
We bought UCO, a levered long play on oil, and by early June it was up almost 120%. We'd been raising our stop level regularly, and did so again that day.
The next day UCO hit its 2016 high, and our stop was hit a few days later for a gain of 104% in four and a half months. Two months later, it had dropped 46% from its high of the year.
As can be seen via the links above, on another oil play this year, OKS, we scored 75% including dividends in 4 and a half months. We've scored big on ETP, WPZ and NS too, which we still hold while enjoying significant dividend payments.
In September we announced that we were buying oil again, via UCO. It's already up 13% from our entry and today we present revised oil charts.
In this close-up look, we see a nearly 4-month downtrend broken with a longer downtrend not far above:
Currently oil is at $48.05 and we believe it'll rise to at least near the $50 level in the near term.
Greater potential exists however, as we illustrate on the long-term chart below:
Here we see a massive falling wedge pattern broken this year, and resistance levels around $60 and $78
It's normal for a break in this type of wedge pattern to result in at least a 50% retracement, which suggests the price would top out in the high $70 range.
If we're lucky enough to even see oil rise to near $60 while we still hold UCO, we'd be utilizing a tight stop at that point to protect what should be very sizeable gains by then.
For now we're raising our effective stop on UCO, intending to close the position should Crude Oil WTI trade below $42
We bought UCO, a levered long play on oil, and by early June it was up almost 120%. We'd been raising our stop level regularly, and did so again that day.
The next day UCO hit its 2016 high, and our stop was hit a few days later for a gain of 104% in four and a half months. Two months later, it had dropped 46% from its high of the year.
As can be seen via the links above, on another oil play this year, OKS, we scored 75% including dividends in 4 and a half months. We've scored big on ETP, WPZ and NS too, which we still hold while enjoying significant dividend payments.
In September we announced that we were buying oil again, via UCO. It's already up 13% from our entry and today we present revised oil charts.
In this close-up look, we see a nearly 4-month downtrend broken with a longer downtrend not far above:
Currently oil is at $48.05 and we believe it'll rise to at least near the $50 level in the near term.
Greater potential exists however, as we illustrate on the long-term chart below:
Here we see a massive falling wedge pattern broken this year, and resistance levels around $60 and $78
It's normal for a break in this type of wedge pattern to result in at least a 50% retracement, which suggests the price would top out in the high $70 range.
If we're lucky enough to even see oil rise to near $60 while we still hold UCO, we'd be utilizing a tight stop at that point to protect what should be very sizeable gains by then.
For now we're raising our effective stop on UCO, intending to close the position should Crude Oil WTI trade below $42
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posted by C. Guinness @ 4:32 PM
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