Quantifying the struggles of oil and the related exchange traded funds is not difficult. When including leveraged ETFs, seven of the 20 worst-performing ETFs over the past 90 days are related to energy futures or equities and that number does not include single-country ETFs with heavy oil and natural gas exposure.
Although it is down 26.4% over that period, the United States Oil Fund (NYSEArca: USO) is not one of those seven ETFs. Still, oil futures are in a precarious position, indicating that risk-tolerant investors may want to exploit further technical weakness for crude with bearish leveraged oil ETFs.
“After a 50% decline, a counter trend really took Crude to the underside of resistance and its 200 Day moving average (highlighted above), where it stopped on a dime. Since hitting resistance, Crude Oil has declined over 15% in the past month,” said Chris Kimble of Kimble Charting Solutions. “Now Crude is testing lows established earlier this year. Is a triple bottom in play or is a further breakdown about to take place?”
Traders can profit from more oil declines with ETFs such as the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) and the VelocityShares 3x Inverse Crude (NYSEArca: DWTI). SCO tries to reflect the two times inverse or -200% daily performance of WTI crude oil while DWTI takes the three times inverse or -300% performance of crude oil. [Inverse ETFs to Hedge Against Hurdles Ahead]
All DWTI and SCO have done over the past 90 days is surge 112% and 68%, respectively. A number of factors have been contributing to the lower oil prices, including rising from the U.S. and Organization of Petroleum Exporting Countries, potential increase in exports from Iran, a stronger U.S. dollar, weakening China outlook and lower institutional interest.