There are reasons for investors to be cautious with volatile energy ETFs. Moreover, if oil prices falls to new lows and the shale industry is unable to turn a profit, the highly leveraged industry may find it harder to repay debt obligations. The IEA said the “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia.
Investors can utilize a number of inverse or bearish ETF options to hedge against further declining energy prices. For instance, the United States Short Oil (NYSEArca: DNO) tracks the opposite moves of the West Texas Intermediate crude oil futures, and the DB Crude Oil Short ETN (NYSEArca: SZO) also tracks the simple inverse of oil. [Leveraged ETFs Are Popular Plays Among Swing Traders]
“The good news for energy bulls is that there is a solid technical reason not to expect too much of an overshoot of the $35 support. On a monthly chart, crude oil is more oversold now that it was in 2008. And on a weekly chart, momentum readings, while still weak, are actually getting ‘less weak,’” adds Barron’s.
United States Oil Fund
