mptrader (< 20)

Rally in UltraShort Oil & Gas ETF

April 06, 2011 – Comments (0) | RELATED TICKERS: DUG

The most recent downleg in the ProShares UltraShort Oil & Gas ETF (DUG) from 31.93 to 25.73 looks like a completed bearish structure. The fact that prices reversed sharply to the upside today after first hitting a new low suggests strongly that the DUG hit downside exhaustion at under 25.80 earlier today. 

For the time being, DUG is in the midst of a run-of-the-mill recovery rally. That said, the energy sector is so overbought and vulnerable to a period of retrenchment that this run-of-the-mill recovery rally (in the inverse DUG) could easily and quickly morph into a powerful countertrend rout, as holders of long energy positions take some of their very substantial profits. 

In terms of the DUG, my initial upside target zone is 27.60-28.00. 

Chartwork at http://www.mptrader.com/middayminute/4/2011/6/