OPEC Agrees to Cut Oil Production, UWTI Flies


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The news of the day is oil, oil and oil. Crude bulls hoping for a production cut by OPEC during their Vienna meeting have had their wishes granted. The expected curb in output is delivering epic gains to the host of exchange-traded products attached to the oil pits.

OPEC Agrees to Cut Oil Production, UWTI Flies Source: SMelindo via Flickr (Modified)

As usual, the biggest movers are twin triple-leveraged exchange-traded funds, VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSEARCA: UWTI ) and  VelocityShares 3X Inverse Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSEARCA: DWTI ).

UWTI is up over 22% on the day while DWTI is down over 22%. Such eye-popping moves are what leveraged funds were created for. And, make no mistake, adrenaline junkies seeking a fix are descending on UWTI and DWTI in droves today.

Let's see if the price action in UWTI is leaving any clues on its next move.

Source: OptionsAnalytix

As designed, the action in UWTI has mimicked that of crude oil, creating a choppy five-month trading range.

On the bright side, the sideways slide has neutralized the 200-day moving average which was previously declining. I suspect, however, leveraged-fund lovers care little about the long-term. But, really, the short-run signals are the same. The trend is equally flat, complete with a meandering 50-day and 20-day moving average.

The UWTI Bull Trade

Your outlook, then, is all about how you view today's OPEC-inspired jump. If you think this is the beginning of a multiday or even multiweek run for black gold, then hop aboard UWTI for a rousing ride. Its prior peak near $30 is a solid target for the weeks ahead.

Alternatively, you could short DWTI if that's your thing.

For a stop loss on the UWTI long play, consider yesterday's low ($17.35) which is now a pivot low. That gives the trade a wide berth to allow any kind of trickery before the ETN continues higher.

EDITOR'S NOTE: UWTI and DWTI will be shut down on Dec. 8.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.

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The post OPEC Agrees to Cut Oil Production, UWTI Flies appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Stocks
Referenced Symbols: CMG , UWTI , DWTI


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