Some of you are probably still holding SCO — the Proshares Ultrashort Crude Oil ETF I mentioned in January at 32 [see: Tick Tock.]  It tagged 42.51 yesterday, and is currently trading around 41.60  That’s a 9-pt (30%) gain in two months.

It’s been above its SMA200 for several days, but is having trouble breaking out of a falling channel dating back to April 2016 — begging the question whether to hold it or take profits.

continued for members…

I don’t know the particulars of this ETF, but it would be interesting to know whether it takes after-hours prices into account.  If CL dips to 45.36, that’s a 5.2% drop from here.  Presumably, SCO would gain 3X that amount, or roughly 15.5% – which would be about 47.35 — a pretty serious breakout of the white channel. 

While CL could satisfy its technical need to tag 45.36 in a swift, after-hours plunge, I assume gas prices need to linger at lower levels for the rest of the month in order to get CPI to level off.   We’ve seen some divergence in the past, but it might be asking too much for CL to bounce back from a 5% drop while RBOB doesn’t.

Bottom line, I don’t know which way it’ll play out.  A 30% unleveraged gain in two months isn’t bad; and, no one ever went broke taking profits.  It could be that between seasonal adjustments and general fudging, the BLS will report a CPI that everyone’s happy with — flat or a slight gain — regardless of whether CL/RB drop from here.  But, I’m pretty sure they’d need to crash prices right away if they’re hoping to report a drop in CPI on Apr 14.

Stay tuned.