DUG is in bullish trend and oversold
UltraShort Oil & Gas (DUG): reversion to the mean
ProShares UltraShort Oil & Gas (DUG) Exchange Traded Fund (ETF) seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Dow Jones U.S. Oil & Gas index. The fund invests in derivatives that advisors believes should have similar daily return characteristics as twice (200%) the inverse of the daily performance of the Index. It invests typically the rest of the assets in money market instruments. The fund is nondiversified.
The relative strength for DUG is positive. For 2010, the shares of DUG are up 8.08% as of on 7/8/10 while the broad market as measured by the S&P 500 index is down 4.51%. In other words, since DUG is a bearish ETF, oil and gas has been weaker than the overall stock market.
Short-Term Reversion to the Mean Data
- Stock: UltrsShort Oil and Gas (DUG)
- Price: 68.40
- Trend: Higher (based on the price in relation to the Ichimoku Clouds indicator)
- 2-day RSI: 4.39 (below 5 is oversold)
- Risk: 2% of account equity
- 20-day Average True Range (ATR): 3.565
- 3 times ATR: 10.70
- Target price: 79.10 (three times ATR plus the current price of 68.40)
- Stop loss: 54.71 (current price of 68.40 minus 3 times ATR)
- Position size: 12.79% of equity (2% of equity risk divided by the 3 times ATR times the price)
7/8/10 Trading Strategy
Buy DUG at 68.40 with a target price of 79.10 and an initial trailing stop of 54.71. If the shares move higher but has not reached the target price, the stop loss should be raised beneath the highest closing price.
For more information on this strategy and other profitable trading and investing strategies visit Grail Investing at grailinvesting.com.
Note: All articles are for educational purposes only. This information should not be interpreted as a recommendation to purchase, sell or hold any security at any time. Always consult with an investment advisor familiar with your financial goals before making any investment or trading decisions.