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Bullish Crude Technicals Put Focus on Leveraged Oil ETFs

Thursday, October 6, 2016 6:41
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Oil derrickWith WTI crude oil futures surging past the key $50 per barrel level this morning, traders are piling into leveraged bullish oil bets on the ETF side of the markets.

Technical analyst Robert Moreno on TheStreet this morning highlighted oil’s bullish move:

The weekly chart shows crude breaking down from a multi-year triangle pattern in August of 2014 and then dropping sharply to under $30 a barrel early this year.

The price action over the last 14 months has formed a large inverse head and shoulder base with neckline resistance in the $52 area.

Moreno also notes that current price patterns suggest a potential $75 price target, although that level could take quite some time to reach. $52 will also likely be a key technical level for crude, with a breakout above that level leading to more gains.

Getting into the ETF space, the ProShares Ultra DJ-UBS Crude Oil ETF (NYSE:UCO), which provides double leveraged bullish exposure to crude oil prices, rose $0.21 (+1.88%) to $11.36 per share in early trading. The UCO currently boasts nearly $1 billion in assets under management, which is very impressive for a leveraged product, and illustrates strong bullish sentiment.

Meanwhile, the triple leveraged VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSE:UWTI) gained $0.69 (+2.57%) to $27.50 per share. UWTI has over $1.3 billion in assets under management, which makes it one of the most widely-owned leveraged exchange traded products in the markets today.

Both of these leveraged bull plays have seen strong interest throughout 2016, which is a bit surprising, given crude oil’s multi-year slide. Bottom-fishers may finally have found a floor now, however, with the recent OPEC production cap deal looking like a true game-changer for the energy industry.

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