Oil ETF Strategy For August – Short Oil Stocks, Long Price Of Crude Oil

Taking a look at the oil ETF tracking data, I see an interesting pairs trade setting up – go short oil stocks, but long the price of crude.  This is a strategy that will likely benefit more should the market stumble up here because the price of oil stocks will undoubtedly move faster than crude.  Let’s take a look at the data..

I know it’s hard to read.  I had to squeeze it into the page, so it’s a bit distorted, but focus on one element of data in particular.  The DI 15 and DI 30 scores are proprietary indicators of SelfInvestors.com that measure the amount of demand in a stock over 15 and 30 trading days. Demand is measured through price and volume so high volume moves up indicate high demand while high volume moves down indicate very low demand.  Lower volume moves are more weighted less.  Taking that into consideration I see very weak demand in shorting the price of crude oil (see ultra short crude oil ticker DTO) with DI scores of -10, 12.  Now take a look at the oil ETF showing the greatest demand.  That’s the Ultra Short Oil & Gas ETF (DUG) with DI scores of 3,3.  So, if you want a decent trade with relatively less risk, you could short oil stocks and go long on the price of crude or if you’re feeling lucky, just short oil stocks.

You can get similar data for all oil ETFs on the home page here at Oil ETF Central

If you’re looking to trade options on oil stocks check out oil trade options.