Calling the Bottom With Oil ETFs - Can You?

By Tom Lydon | July 24, 2008 | 6:02 PM | 1 Comment

To look at energy-related exchange traded funds (ETFs) and their performance over the last month, you might be inclined to think that the long, mad season of skyrocketing gas, oil and other fuel prices is finally wrapping it up.

Have a look:

• United States Oil (AMEX: USO): down 9.7% in the last month; up 32.2% year-to-date
• United States Natural Gas (AMEX: UNG): down 27.5% in the last month; up 25.7% year-to-date
• First Trust ISE-Revere Natural Gas (AMEX: FCG): down 22.6% in the last month; up 12% year-to-date
• iPath DJ AIG Natural Gas Trust Sub-Index (NYSE: GAZ): down 27.2% in the last month; up 25.6% year-to-date
• PowerShares DB Energy (NYSE: DBE): down 9% in the last month; up 36.6% year-to-date

It's not looking pretty, is it? But are we out of the woods?

It's a dangerous question to ask - just look at all the predictions that have yet to pan out:

*In May, Goldman Sachs predicted that oil could rise from anywhere to $150 to $200 within two years. Okay, they were close - we did get within spitting distance of $150.

*An analyst at Citigroup at the same time said prices could easily fall by $40 to $50.

*Earlier this month, T. Boone Pickens predicted that oil may fall to $100 in the next two years.

*A couple of weeks later, Pickens said oil could reach $300 if the United States didn't scale back on its imports.

How do you guess where it's going? How do you call the bottom?

Here's a hint: you don't. Have a plan instead. We suggest only buying funds above their 200-day moving averages (and that are overall showing an uptrend), and getting out when those funds fall 8% off their high or drop below their trend lines.

It'll make your life a lot easier.

Check out Tom's new book iMoney here.  

They made just about every They made just about every prediction they could.. Submitted by Monahan73 on Fri, 2008/07/25 - 11:23am » reply |