I added to my DUG position today. This horse (DIG) is not frothy but it's lathered up. Time to take the saddle off DIG and USO.

chili 

I opened a position in DUG just before the close on friday because of the probable double bottom on very heavy volume.  There is no obvious reason for oil and/or gas to go down except that nothing goes to the moon in a straight line.

uh 

This article at Bloombergs indicates that options traders are becoming bullish on the usd.  A stronger dollar should help to level off the price of oil.

http://bloomberg.com/apps/news?p&s&refer=home

uh

Interesting thread. I actually went in a week and a half ago. I am down about 4% so far. Dumb question, if they are short how do they pay a dividend ?

 The problem is that bubbles tend to keep going for awhile before they bust so it takes guts to stick it out.

Guts and a tight stop.

  I have not looked at the internal portfolio of DUG, but I assume the dividend comes from the interest on the collateral they put up for the short sales.

uh

On a related question, I put in a market order for a stock today but did not put in any kind of stop loss order.  In hindsight, I think I might want one.  How do you go about doing this after the fact at Fidelity borkerage (I obviously don't buy stocks alot).

Thanks, Dan

I am still holding my DUG until the MACD tells me to sell.

chili

I was stopped out today with an 11 cent per share profit.  I'll have to study the chart again, but I think I'll get back in before the end of the week.

uh

Still short and even shorter. Bought more DUG yesterday. I consider this a classic blow off top. My time horizion can get longer than normal if needed.

chili    

I was looking right at it when it went below $24.50 and waited too long to buy more. I am still holding what I own ,but believe it will revisit the above mentioned price again, before the froth is over.        Don

I sold my DUG today and took a hit. The reason I sold was because USO and UNG were up, even though DIG was down. The long week-end was another reason. The only stock I own going into the long week-end is SDS.

chili   

Did anyone else get back in??  Fwiw I bought in at $28.81 per share this afternoon.

uh

I understand that bubbles take awhile to burst. The problem is that when you are on the short end, if you are way too early you can get truly hurt. My feeling is that if the FED doesn't hold tight at the end of the month (I think they will not raise rates), then the dollar gets killed and I get out but look to get back in after Labor day.

If the FED holds interest rates the way they are, the dollar should firm and we should do well with DUG. Those are my conclusions.

You guys might be on to something here.

It takes guts, I'll give you that.  I watched today's seesaw ride with some interest, from the sidelines.  

What concerns me, though, is that DUG shorts a basket of energy stocks that aren't strictly tied to the price of oil, correct?  In other words, I can envision a scenario when oil goes down but the companies you're short here don't join hands in lockstep.  What's the average P/E?  Might be something to investigate.

On the other hand, uh is in the money on his $28.81 trade.

WJ
 

Not anymore.   I just bailed at 27.94.

uh

I would not mess with an ultrashort sector fund like DUG: It dropped -8.99% ($2.72) today as crude oil rallied $5.49 to $127.79. As I understand it, crude oil had dropped 10% in previous sessions which traders considered a technical correction, so they started bidding up prices again. (I'm satisfied being long in BGR which gained +3.45%/$1.22 today, bringing its year-to-date return up to 17.6%.) The Morningstar chart for DUG (see below) will look even worse after today.

Performance  more
Growth of $10,000	05-31-08

Fund		---			---			---			---			-20.2
+/- Cat		---			---			---			---			-16.4
+/- S&P 500 TR		---			---			---			---			-16.4

Trailing Returns %	06-04-08
	YTD	3 year	5 year
Fund (Mkt)	-15.71	---	---
+/- S&P 500 TR	-10.37

Wow...a few weeks ago I had posted that it was usually a profitable trade to short oil stocks after Memorial Day.  Well not this year.  Shows how little I know.  This market is so volatile that good entry points are almost impossible for me to determine.  Stop losses are triggered on an even more irratic basis. 

Remember when the tec bubble collapsed.  It began in March of 2000.  If my memory and notes serve me correctly, I believe that that August I also experienced volatile markets that whipped sawed me.  And so I exited. 

Am I flakey or is this a similar correlation.

Seems to me that following a mega up move as experienced in both the above situations, the market becomes hugely volatile and then sells off.  Obviously, what is going on now with oil, I can only predict as my crystal ball is cloudy.   I think that  we are seeing the beginning of a major sell off.  When it will be, or what will trigger it is beyond my capabilities.

Just my 2 cents.

Jeannie

Oh I think I left something out of the above post.  This is what I've done.  I have two oil and gas sector funds within my 403B at FIDO.  These are not my only holdings within the 403b; but they have certainly outperformed anything else..  I have reduced my holdings in both over the past 3 months.  At present only contributions remain in each not profits.  All profits were sold off.  I have owned these 2 funds for more than four years.  Twice before I have harvested profits in the early spring.  This however, is the first time that I have reduced my holdings in a major way. The cash generated will sit in a mm earning almost nothing till the end of the summer at least.

Second; I am not investing nor shorting anything in this sector.  I have cash available in an IRA but I'm not qualified to make any moves at this time.  I may miss an opportunity, but that's how I'm handling it for now.  Conservative for sure.  Old age...maybe.

Jeannie

I think it does make sense. DUG is short an index of energy stocks (not commodities) - I'm guessing (haven't checked) that Exxon would be a big part of that index, and it was down 2.8% today, and most other energy stocks were also probably down, while DUG was up approx. 2.4%. So, lots of idiotic momentum trading being done by hedge funds, program traders, and other types of wall st manipulators, just wildly buying oil, wildly selling stocks.

...and most other energy stocks were also probably down, while DUG was up approx. 2.4%. So, lots of idiotic momentum trading being done by hedge funds, program traders, and other types of wall st manipulators, just wildly buying oil, wildly selling stocks.

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The problem with DUG is that it's not strictly oil stocks being shorted, it's also natural gas, and from what I can tell they didn't go down yesterday (e.g., XTO was up about 1.5%).   You need to know, too, that DUG amplifies gains (or losses) by a factor of 2.  If you believe there's going to be a "blow off top" in energy, as a trading vehicle, one could make money here.

WJ 

Crude is down and the DOW is down but DUG is down 3.5% today. That seems like a big drop. I know that there are nat. gas stocks in here but it still seems like a nice one day drop.

Any thoughts from anyone out there who is also pissed off like I am LOL!!

Crude is down and the DOW is down but DUG is down 3.5% today. That seems like a big drop. I know that there are nat. gas stocks in here but it still seems like a nice one day drop.

Any thoughts from anyone out there who is also pissed off like I am LOL!!

[/quote]

DUG's index is is the inverse of the DJ US Oil and Gas Index.  This index is weighted 27% to XOM, and 40% to XOM, CVX, COP, and SLB combined.  These stocks are all up 1-3% today, so it is not strange at all, Mike, nor does it have much (if anything) to do with NG.

DUG is more about being short the big integrateds than anything else.

And he integrateds are currently functioning as self-hedging instruments for oil and refined products.  As the price of crude falls, production revenues may decline but the crack spread will widen so refining results will improve to balance out production.

DUG is not a great vehicle to short the high price of oil, if that is your intent in holding the security.

HTH

TJ

Whats a Drak market?

I noticed that trading volume on dug has exploded in the past 6  weeks, especially on up days. A bottom may also have formed at the $26 level.  Patterns like this can frequently signal a turn is imminent, but I still don't see any slowing in the oil price.  Does anyone else see something that I am missing?

uh 

UH, while I do not know what a Drak market is, many hedge funds are investing in DUG. Supposedly anything above $125 per barrel is unsustainable in the long run. Discloser, I am still in and looking to buy in the $25.50 range.  Best regards, Don P.S. FWIW.. I thought that you had a good position in the $27's

I opened a tiny position in DUG @28.5 - Wellsfargo (love 0$ commission) - to keep me interested in DUG. I have been tracking DUG charts & DUG broke out the consolidation pattern. It might have been too early to pick up DUG, and I'll love to average up for a change.  DUG is my contrarian play. I'll try to hold these for 3-5 years.

Worst case analysis - We could see another leg down for DUG for 5% slide from current price if recent run up was a bear trap - Still I see worst case 15% downside potential (based on my charting knowledge). My my 5% support level breaks, I'll wait for $25 levels to pick some more.

Whats a Drak market?

I noticed that trading volume on dug has exploded in the past 6  weeks, especially on up days. A bottom may also have formed at the $26 level.  Patterns like this can frequently signal a turn is imminent, but I still don't see any slowing in the oil price.  Does anyone else see something that I am missing?

uh 

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What a great call! DUG seems to have broken out. Lets watch & see.