Bought 250 HOD.TO @ $10.34

Current state of affair: S&P500 testing 1108 resistance. Oil testing 77.50 resitance. EUR/USD testing 1.2350 resistance. USD/CAD marking higher bottom at 1.0280, low of day was 1.0260.

I am shorting oil (HOD.TO) here because it looks like that the rally is non-sustainable in the short term as we are testing resistances across the board within a longer term downtrend. Moreover, the reward/risk is good at this point since the stops are clear (e.g. the various resistance price levels in first paragraph).

Figure 1 is the long term chart of U.S. DB Oil Fund (DBO). It shows DBO is at the top of a congestion zone in a longer term down trend.

U.S. DB Oil Fund (DBO)

Evidently, my stop is DBO pass $25. That is around $10.00 for HOD.TO.

Thus, my risk is ($10.34 – $10.00) * 250 = $85 + $9.90 commission = $94.90 = 0.98% of my Questrade RRSP trading account.

Frankly, my conviction in this trade isn’t that strong. But as the setup is there and the reward/risk is good, I am taking a light stab at it.

DBO intraday

Sold 250 HOD.TO @ $10.59, -0.95% Loss

Oil broke above $75 resistance overnight. So my Horizons BetaPro Crude Oil Bear Plus ETF (HOD.TO) gapped down below my 10.60 mental stop at the open. I watched the U.S. DB Oil Fund (DBO) price actions this morning to time my exit as shown on Figure 1.

While the price gapped beyond my stop, the volume was weak this morning (Figure 1). HOD.TO traded below $10.40 on the gap momentum but I held on because of the low volume.

U.S. DB Oil Fund (DBO)

I waited and waited until DBO traded near 24.50. This is a short term support level as shown in Figure 1. This was also the equivalent of my previous stop loss for HOD.TO at $10.60. Even though I believe this is a stop hunt for the oil shorts because of the lackluster volume, I am not one to argue with my plan.

I pegged my mental stop at 10.60 at the time of entry. HOD.TO broke below my stop price. I had three options:

1. Ditch it at whatever price I can get.
2. Exit on retracement to my original stop price.
3. Exit on break-even.

For the reasons as discussed above, I picked option #2.

Here’s a calculation of my loss for this trade. ($10.59 – $10.92) * 250 shares = -$82.5 – $9.90 commission = -$92.40 = -0.95% loss of account total.

In any case, it looks as though my initial low-ball bid at 10.50 was a good entry point. I shouldn’t have gotten impatient and entered at a short-term resistance price level.

Bought 250 HOD.TO @ $10.92

I shorted oil using a Horizons BetaPro ETF (HOD.TO) at $10.92 purchase price for 250 shares. Spot crude oil is about $74.75 at the time. US DB Oil Fund (DBO), which is my proxy for my oil trades, is trading around $24.35 at the time of this entry. This is just below previous support-turned-resistance at $25. See Figure 1.

U.S. DB Oil Fund (DBO)

This position is also my bet on an equities downturn soon. I considered buying puts (shorting) on Barrick Gold (ABX.TO), but I chose to be more conservative with a smaller position in HOD.TO instead.

I actually opened a low-ball offer on HOD.TO at 10.60 in the morning. But seeing that HOD.TO never touched below 10.70 today, I got impatient and executed a market order when I saw it edging above its trading range.

My stop for this position is 10.60. Risk is $0.32 x 250 = 80 + $9.90 commission. Which is about 0.92% of my RRSP trading account. This is more in-line with my preferred risk level than my recent options trades.

DBO intraday

Sold 250 HOD.TO @ $11.94, +2.2%

I closed my crude oil short with Horizons BetaPro Bear Plus (HOD.TO) at $11.94. Purchase price was $11.11 from yesterday. I don’t think this is the end of the oil bear run yet. However, I couldn’t give up a 10% gain (totalling 2.2% in account) in one day. Besides, it is Friday so I would rather take some profits off the table before the weekend.

Profit is $207.50 – $4.95 x 2 = $197.60. The maximum potential risk was $152.50 based on my stop calculation. Thus, the realized reward/risk ratio is 197.60/152.50 = 1.30. It’s alright but not that good as I usually aim for 1.50 at least.

Here are the main reasons for my exit.

Figure 1 shows the chart of crude oil. Note that it is end-of-day data only so today’s massive drop is not shown. I marked my exit price of $71.00 (crude oil) 0n the chart. See that this price is a support level in the long term.

Light Crude

Figure 2 shows the intraday chart of U.S. DB Oil Fund (DBO). Notice the weak volume on the second test of 23.70 support level. This figure was captured at the time of my exit. DBO traded below 23.70 and HOD.TO traded above 12.00 as I am writing this. Let’s see if they can stay that way.

U.S. DB Oil Fund

Bought 250 HND.TO @ $6.51

Update: I closed this at $6.36 just now as my HOD.TO position is trekking back close to breakeven. This is a loss of $37.50 + $9.90 commission.

I re-entered my natural gas short with HND.TO @ 6.51 as planned on my previous break-even trade. The U.S. Natural Gas Fund (UNG) is testing the top of its channel at $7.85 as shown on Figure 1.

U.S. Natural Gas Fund (UNG)

However, HND.TO cracked the $6.50 support as I’m writing this and is now trading down to $6.38. My mental stop is at $6.20 and hard stop is $6.00.

Figure 2 shows the intraday chart of HND.TO as the time of my entry.

My risk for this trade is ($6.51 – $6.00) * 250 shares = $127.50 = 1.4% of my RRSP trading account.

This should be the last of my new position for a while. I have enough on the table with my CM.TO, HOD.TO, and this. My goal now is to move my stops to breakeven as soon as possible.

Horizons BetaPro Natural Gas Bear Plus (HND.TO)