Flash Alert: DUG Out
Late last week, the UltraShort Oil & Gas ProShares (AMEX: DUG) touched my recommended stop of $38.90, generating about a 15 percent loss.
If you didn’t get stopped out, sell UltraShort Oil & Gas ProShares now and take the loss.
As I explained in my November 27 Flash Alert Tankers Up, Crude Down, I intended the ProShares as a hedge against a decline in crude oil and energy-related shares. To make a long story short, I was right about crude oil and wrong about the ProShares.
My thesis on oil, outlined at length in the past few issues, remains that we’ll see a moderation in prices going into 2008. Although OPEC may claim it’s not going to boost output, the spike in tanker rates lately suggests the cartel isn’t doing as it says. It appears that more tankers are headed to US shores, and that will serve to gradually loosen the tight inventory situation. This is why crude oil prices have remained well off their highs despite last Wednesday’s generally bullish crude oil inventories report.
This is also why we’re seeing the tanker stocks really spike. That list would include Frontline (NYSE: FRO), a stock I also recommended in that November 27 alert.
Some energy-related stocks will eventually react to falling oil prices and pull back. But that’s not happening as of yet, and positive seasonality for the broader stock market really kicks into high gear over the next few weeks. We don’t want to fight that. I’ll look to perhaps recommend jumping back into UltraShort Oil & Gas ProShares some time in early 2008.
The good news is that although our hedge lost money, most TES Portfolio recommendations have been on fire, more than compensating for any loss in the ProShares.
I continue To recommend shorting Halliburton (NYSE: HAL). This company’s heavy exposure to a still-weak North American drilling market is a huge drag. In particular, Halliburton’s exposure to the weakest service business of all–pressure pumping–will continue to haunt the stock.
In addition, I’m adding a short in the US Oil Fund (AMEX: USO) to the Wildcatters Portfolio as a hedge against falling oil prices. Short US Oil Fund using a stop loss at $80 to protect your downside. I discussed this idea at some depth in last week’s issue.
If you didn’t get stopped out, sell UltraShort Oil & Gas ProShares now and take the loss.
As I explained in my November 27 Flash Alert Tankers Up, Crude Down, I intended the ProShares as a hedge against a decline in crude oil and energy-related shares. To make a long story short, I was right about crude oil and wrong about the ProShares.
My thesis on oil, outlined at length in the past few issues, remains that we’ll see a moderation in prices going into 2008. Although OPEC may claim it’s not going to boost output, the spike in tanker rates lately suggests the cartel isn’t doing as it says. It appears that more tankers are headed to US shores, and that will serve to gradually loosen the tight inventory situation. This is why crude oil prices have remained well off their highs despite last Wednesday’s generally bullish crude oil inventories report.
This is also why we’re seeing the tanker stocks really spike. That list would include Frontline (NYSE: FRO), a stock I also recommended in that November 27 alert.
Some energy-related stocks will eventually react to falling oil prices and pull back. But that’s not happening as of yet, and positive seasonality for the broader stock market really kicks into high gear over the next few weeks. We don’t want to fight that. I’ll look to perhaps recommend jumping back into UltraShort Oil & Gas ProShares some time in early 2008.
The good news is that although our hedge lost money, most TES Portfolio recommendations have been on fire, more than compensating for any loss in the ProShares.
I continue To recommend shorting Halliburton (NYSE: HAL). This company’s heavy exposure to a still-weak North American drilling market is a huge drag. In particular, Halliburton’s exposure to the weakest service business of all–pressure pumping–will continue to haunt the stock.
In addition, I’m adding a short in the US Oil Fund (AMEX: USO) to the Wildcatters Portfolio as a hedge against falling oil prices. Short US Oil Fund using a stop loss at $80 to protect your downside. I discussed this idea at some depth in last week’s issue.
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