Trading Oil ETFs and Inverse ETFs

Working in the oil and gas industry, I have always had an attraction to trading oil. In the Canadian market, I trade HOU.TO (Horizon Crude Oil Bull Plus ETF) and HOD.TO, its inverse brother. Both of these are 2x leveraged ETFs.
In the US market, I used to trade UWTI and DWTI, but these were delisted in December 2016 by Credit Swiss. However, good news was, Janus Capital, the brokers behind UWTI and DWTI listed a new Velocityshares 3x bear/bull tied to WTI crude oil and named them VelocityShares 3X Long Cruide ETN (UWT) and VelocitySHares 3X Short Crude ETN (DWT). As opposed to HOU.TO and HOD.TO, as their name imply, these ETFs are 3x leveraged.

Looking at the UWT chart from inception to date, oil was moving sideways between $23 and $27 from right up to end of February 2017. It then had a massive drop to $16 and started a downtrend with wild swings that took it up to $23.50, then back down to $13.70, then back up to $19.40, to finally hit rock bottom at $10 on June 21st. A swing trader could have made massive gains both on the upswings and downswings during this period. Since June 21st however, oil has started to form an ascending wedge pattern and today UWT broke 2 major resistance levels. It broke $14.25 horizontal resistance, and $14.25 upper trendline of the downtrend with above average volume of about 10M shares traded. All indications show that oil is turning bullish and possibly starting a new uptrend. Next resistances are at $16 and $19.50, but knowing how volatile oil is and its susceptibility to bad news, I do not expect it to be a smooth ride upward. I expect seriour retracements and even sideways movements. The next few days will show if this was a real breakout or if a false one, thus resuming the downtrend. Either way, the potential for massive profits exists when holding on this these ETFs for 4-8 weeks. They demonstrated to be having major 4-8 week swings for the past 4 months.
The beauty of ETFs is that one only need to buy at pivot points and trade in the direction of the oil market. By buying UWT on upswings and uptrends, and then selling and buying DWT on down swings and downtrends, one could in theory be making major profits continuously.
Take a look at DWT chart


If one had bought at the low pivot on May 25th at $26 and sold at the third consecutive red candle and sign of weakness on June 23rd at $42 could have made a 61% gain. On a $10,000 dollar position, that’s an easy $6000 in your pocket in a matter of 4 weeks…and then buying at $10, with a little patience, by today could have made another 40% or $6400 profit on the upswing. $12,400 or 124% gain on your position in 8 weeks sound pretty darn good to me!
So let’s see what happens in the next few days. 16% gain in 2 days, I expect retracement and profit taking coming soon…

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