Oil prices this week suffered the worst single-day drop since 1991 during the Gulf War. The fall provided an epic spark for reverse exchange bear funds, including Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares (DRIP). Oil prices are currently down this morning and DRIP stock is up over 24%
When it became known on Sunday that Saudi Arabia and Russia were entering a price war in which the former promised to increase production despite low oil prices, traders jumped into DRIP with both feet. Oil prices suffered the worst single-day drop since 1991 during the Gulf War. SELL SELL SELL – Oil Traders Sold Like the Movie “Trading Spaces.”
Meanwhile, DIREXION SHARES ETF TRUST DAILY S&P OIL & GAS EXP & PRD BUL 3X (GUSH) fell 81.22% yesterday at approximately 25 times its average daily volume. There is some speculation that the GUSH stock may be liquidated. Also, there are several lawsuits and FINRA actions against brokers who sold leverage ETFs to clients. Read More – Gush Stock Collapses. End of Leveraged ETFs?
By contrast, the DRIP value nearly doubled on Monday, rising 98.73% on a large volume, meaning the ETF has more than tripled for the week ending March 9 and has increased a staggering 886.17 % so far this year!
The exciting part of the story is that last week, traders got $11.24 million from DRIP while pouring $39.32 million into the bullish GUSH. While many traders were too early to commit to the bullish bottom and those exits mean some traders missed out on Monday’s DRIP surge.
Pro Tip: it’s always advisable to take profits as leveraged ETFs skyrocket.
On Monday, the ETF opened at $575 and was trading as high as $665.50 and as low as $402.19 before closing at $549.20.
DRIP’s close on Monday was well below the Day’s lows, but it’s also well below its highs and opening price. That could be telling for the fund that is designed to deliver triple the daily inverse performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
Oil is likely due to a short-term rally and was trading higher on Wednesday amid hopes that the White House would reveal stimulus measures to boost the economy.
Those would be DRIP-weighing events, but with investors concerned about credit downgrades and even shale patch bankruptcies, DRIP could have its Day or days again soon.
Is DRIP A Buy A Buy?
If you have a colossal stomach for risk and willing to quickly enter trades, then DRIP may be a “buy.” DRIP is a highly volatile ETF, and this environment is only making it worse. It is highly likely that some agreement could be made that will boost oil prices and completely reverse a lot of the gains of DRIP. I would recommend looking at the short term technicals like the Hull Moving Average and oscillators for both entry and exits points.
Stock Market Today
The main US stock index Dow Jones continues to be in a stable downtrend, moving down after the collapse of the market last Monday. The Day before, the index showed a rapid downtrend, once again updating annual lows at 22500.0.
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- All Sectors Close Lower as Averages Drop More Than 4% on the Day
- Breadth Metrics Weaken; No Sign of Less Selling Pressure Yet
- Small Caps Continue to be the Worst of the Major Market ETFs
- Futures Point to a Lower Open Today
Among the leaders of the decline in the index are Boeing (–18.50%), Dow (–10.86%), United Technologies (–9.94%), American Express (–7.67%), Cisco (–7.56%).
The recovery of the market is out of the question so far; however, if the key macroeconomic indicators, including the February Producer Price Index and labor market data, will meet expectations, the market may correct moderately upwards.
Tom, aka T Rex, is seasoned financial pro that cut his teeth on the Chicago trading oil futures in 1995. In less than 3 years he bought his own seat and set up shop on the exchange. For the next 10 years Rex traded his own account and some institutional accounts. In 2017, he decided to move to Florida and focus on educating traders and writing for financial websites.