Oil’s price has tumbled since hitting a high when Hamas attacked Israel. West Texas Crude (WTI) topped out near $94 and now trades nearly $20 lower. Black gold could be ready for a bounce back. The commodity’s Relative Strength Index (RSI) Is closing in on an oversold reading of 30. It stands at 32.67 as we type.
We also see a block of support starting at $74 down to $67. All the technical debris in that box should put in a durable floor for crude. If oil turns green, then resistance at the 200-day moving average of $78.18 looks like a logical destination initially and then $80 after that.
Investors that might consider trading a rebound in oil might consider ProShares Ultra Bloomberg Crude Oil (UCO). The exchange-traded fund (ETF) seeks a return that is 2x the return of its underlying benchmark (target) for a single day. The fund’s benchmark is an index of crude oil futures contracts. It is not intended to track the performance of the spot price of WTI crude oil.
For example, if WTI rises 1 percent on the day, UCO should gain close to 2 percent. Of course, the opposite is true if WTI drops.
Short term trading using leveraged funds is only for the most aggressive investors who can afford to lose money in short timeframes.