Stock Chart DUG

Posted by downtowntrader | 6/26/2008 08:47:00 PM | 0 comments »

Stock Chart Analysis DUG

UltraShort Oil Gas & ProShares (Public, AMEX:DUG)

I know many will see this post about going long on DUG (inverse oil producers and oil service stocks) and assume I am trying to call a top in oil. I'm not calling a top in oil, although I think there is a chance it is close to topping out. What motivates me to write about DUG, is the recent divergence between oil the commodity and oil producers and service stocks like XOM and DVN. Notice that while Oil is hitting record highs, these oil stocks are not hitting new highs with oil.

In looking at DUG, notice that while oil was surging today, DUG didn't break to new lows, or even under yesterdays low. Are funds distributing Oil stocks into the unsuspecting retail traders? This is typical of institutions during the climactic phases of any trend, and DUG is showing some very interesting volume patterns. I highlighted the highest volume days for DUG in the chart below and circled the days they corresponded with. All the high volume days were associated with buying in the $27 range showing strong support for that level. It's tough to try and call bottoms or tops, but it sure looks like money is flowing into DUG here, even as Oil continues to surge. A key level to watch here would be DUG trading over $30.

Good Trading,


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