Trade of the Day: ProShares UltraShort Oil & Gas

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August was a rough month for global markets. Volatility surpassed expectations, and last week’s sudden market plunge had investors scrambling. The Dow dropped 1,000 points within the first few seconds of last Monday’s open, and while indices were able to rally out of the correction zone by mid-week, volatility remained high.

China’s yuan devaluation seems to be the main issue that has investors skittish, but falling oil prices and Fed rate hike worries are also still weighing on Wall Street.

Yesterday, U.S. indices opened in the red despite last week’s market rally. Both the Dow and S&P 500 closed down more than 0.5%. So, it’s not surprising that the Turner Analytics Market Bias is still favoring a bear trend for a second week in a row.

While most on Wall Street were left reeling from the market tumble, Signal Investor and Turner Analytics members were left mostly unscathed. You see, I always tell my subscribers to stick to three very important market strategies:

  1. When the Market Bias is above the Neutral Zone, you want to be fully invested in fundamentally strong, large-cap stocks that are technically strong and trending higher.
  2. When the Market Bias closes for the week inside the Neutral Zone, you want to move to cash — but in a methodical, case-by-case, aggressive exit strategy. Your goal is to be 100% in cash by the time the market breaks out of the Neutral Zone.
  3. When the Market Bias chart is below the Neutral Zone, you want to be fully invested in the top 5 or so broad-market, highly-liquid inverse ETFs that tend to move up as the market moves down.

So, since this week the Market Bias is favoring a bear trend, I’m recommending an inverse exchange-traded fund (ETF) to capitalize on the downturn. If you aren’t familiar, inverse ETFs are bought and sold just like stocks or other ETFs. They are designed to rise as a particular sector or index falls so investors can profit on the downside without having to short stocks.

ProShares UltraShort Oil & Gas ETF (DUG) is an inverse ETF that has a goal of moving inversely to the Dow Jones U.S. Oil & Gas Index. This is an “ultra” ETF and, as such, is 2x leveraged, which can be interpreted to have higher risk. If oil and gas continue to move lower, this inverse ETF will move higher. In the current energy environment, playing the downside is the best play.

DUG is rated as a buy in the Turner Analytics database, earning a 136 out of 200 score. DUG is also currently bullish and is one of the best performing inverse ETFs in the database. The inverse ETF is moderately volatile, with an expected move of 9.4%, or $6.45.

Energy Trade of the Day: ProShares UltraShort Oil & Gas ETF (DUG)

So, I recommend entering this bearish energy ETF at $68.10 or better and setting your stop at $64.56. Our near-term target is $74.76. Your exit date is Nov. 30, 2015, or sooner if our upside target price is reached.

Mike Turner and his team of software engineers developed Turner Analytics, a sophisticated software market and trade-timing system that provides unbiased, quantifiable recommendations on thousands of equities and rates, ranks and scores these equities from best to worst in an easy-to-use on-line tool for individual investors. He is also the editor of Signal Investor.

Most recently, Mike launched Quick Hit Trader. This trading service is based on weekly analysis of the 6,000+ stocks and ETFs in his proprietary Turner Analytics computer stock-rating system. Every Monday before the market open, Mike emails subscribers his three best trades for the week, including the buy, sell and target price.


Article printed from InvestorPlace Media, https://investorplace.com/2015/09/energy-trade-of-the-day-proshares-ultrashort-oil-gas-etf-dug/.

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