The ProShares UltraShort ETF in the oil and gas sector, DUG traded at a new low of 29.05 today. How high will oil and oil stocks go? At $125 a barrel, you have to wonder when prices will stabilize.
It’s important to realize that a trend can continue far beyond what seems rational. Trading against that trend can be dangerous and cost you trading capital. That’s why I always try and trade with the trend of the daily chart.
Today is a good example of that. Yesterday, OIH had a weak day closing lower. It started out today on the path lower too. The 5-minute chart shows that it found a bottom and bounced. That’s where it put in a base of 5 candlesticks. At this point you have to take the prevailing trend of the daily chart into consideration. The big picture is up. Note the increase in volume as OIH cleared the base. Combining trends, price, and volume of different time frames are all parts of the trade.
