First off, my apologies, folks. I meant to get this free trade to you Wednesday, but lost power as a tornado ran through Maryland…
But we’re safe, everyone is OK and we’re ready to give you the free Fortune Research trade alert pulled directly from Tuesday’s watchlist.
We mentioned then that there was a short play in crude oil we liked… and this is a good time to get in…
So let’s go short on ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO).
Source: Bloomberg
Oil reached $70 and I expect a pullback in the near future, especially because of how the dollar is behaving.
Source: Bloomberg
Keep in mind that oil is negatively correlated with the U.S. Dollar, as seen in the chart below. The dollar hit a new high in August and I expect it to hang out in that range. Currently, it’s near the bottom of that range and will start to go up…
Meaning we can take a bet on oil going down.
Not only that, but oil volatility, measured by the OVX, is making a new higher low, with almost nowhere to go but up.
Source: Bloomberg
So if oil volatility goes up, the dollar goes up… and that means oil goes down and our short could pay off.
I’m not expecting a pullback in oil all the way to the $60 level, but I can easily see $68. We’ll hold this trade through Friday or through the long weekend, but make sure to exit out if oil continues to climb and breaches the $72 level — keeping a 5% downside.
We’ll be back later to do a deeper dive on oil. Happy shorting!
All the best,
Matt Warder
Fortune Research
