The back story: On June 19. I started my week looking for a rebound in oil, and bought the VelocityShares 3x Long Crude Oil ETN (UWT) – the leveraged version of United States Oil (USO) – and set a tight stop-loss. I wound up taking the loss late in the day rather than hoping and praying for a better outcome the next day.
Part of my strategy in finding bottoms comes from taking small losses and keeping my powder dry so that when I do find the bottom I am set up for a bigger win.
I believe the payoff to that patience comes now.
The set-up: I think oil is now set up for a run; I saw an hourly crossover on the USO that showed me there is the potential for a 5 or 6 percent upside.
As a short-term trader, I always want to leverage my trades. If I am right — and I wouldn’t make a trade if I didn’t think I was right – triple-leverage on the upside is my go-to for short-term trades, anything under a week long.
The play: I bought UWT Monday at $11.02. I am willing to average in and buy more until it goes about 5 percent lower, and will stop out below that, so again I have set tight stops on the trade.
I think there could be upside, thanks to the leverage, of 20 percent. I will start taking profits around $12 per share. I’d like to see it go to $13 or $14, but if it goes up 10 percent – roughly around $12 – I’ll take some money off the table.
Jeff Bishop is lead trader at TopStockPicks.com. He runs short-term trading strategies, primarily using leveraged ETFs. At the time this was published on RagingBull.com, he held shares of UWT that he had purchased on Monday, June 26 and was planning to trade them as described in the article. He last traded in UWT, at a small loss, on June 19.