July 17, 2018, 11:42 a.m. EDT

Here’s what to do with oil stocks and ETFs as oil prices crash

President Trump has said gas prices are too high

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    United States Oil Fund LP (USO)

or Cancel Already have a watchlist? Log In

By Nigam Arora


Reuters
President Donald Trump

President Trump has said gasoline prices are too high. He asked Saudi Arabia to increase its oil output by two million barrels. People who understand the industry immediately said there was no way the Saudis would raise its output because that would lower prices and profits.

Now the news is that Saudi Arabia is offering extra oil to some Asian customers. You don’t have to be a genius to infer that Saudi Arabia is indirectly complying with Trump’s request. In addition, with some help from Russia, Trump may succeed at lowering gasoline prices. Let’s examine the issue with a chart.

Read: Oil price drops ahead of Trump-Putin summit

Chart

Please click here for a chart of oil ETF /zigman2/quotes/203483736/lastsale USO +15.46% . The USO chart is being used instead of oil futures because most investors do not trade futures. Oil ETFs such as Velocity Shares 3x Long Crude Oil , Velocity Shares 3x Inverse Crude Oil and ProShares Ultra Bloomberg Crude Oil /zigman2/quotes/208496666/lastsale UCO +31.56% are popular, but it is better to use USO for analysis because it is not leveraged and is highly liquid. Please note the following from the chart:

• The chart shows the recent oil breakout.

• The chart shows the downgrade of oil by The Arora Report. The Arora Report ratings on oil and other indicators on oil are widely followed.

• The chart shows the signs of an oil rally failing.

• The chart shows oil fell below the support on heavy volume.

• The relative strength index (RSI) shows that oil is oversold and a short-term rally can ensue.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

Oil ratings and indicators

Here are our current ratings on oil.

Short-term: Mild negative.

Medium-term: Neutral.

Long-term: Neutral.

/zigman2/quotes/203483736/lastsale
US : U.S.: NYSE Arca
$ 5.90
+0.79 +15.46%
Volume: 225.91M
April 3, 2020 8:00p
loading...
/zigman2/quotes/208496666/lastsale
US : U.S.: NYSE Arca
$ 2.96
+0.71 +31.56%
Volume: 142.29M
April 3, 2020 8:00p
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Investing

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.