Avoid Trading UCO, SCO, UWTI and DWTI today: Stock Traders Daily

Stock Traders Daily has been recommending oil trades using ProShares Ultra DJ-UBS Crude Oil (NYSEARCA:UCO) and Proshares Trust II (NYSEARCA:SCO) to its clients through a strategy called LOTS (Leveraged Oil Trading Strategy) and over the past eight weeks that strategy is up by approximately 70%.

Today, on the heels of the news surrounding the fire in Alberta, Canada, Stock Traders Daily has the following recommendations not only for its clients but also for other people involved in the oil space.

The price appreciation in oil overnight and at the onset of trading on Thursday was due solely to the fire in Alberta and the temporary production outages associated with that fire.  Oil production facilities are not in danger, some production has simply been curtailed as companies accommodate requests to support the effort, respect employees who are displaced, and grapple with transportation issues, all of which are themselves temporary.

Had it not been for this news oil prices would be lower!

In our opinion, once this news is quieted, which means the fire must be contained, oil prices are likely to move back to where they were and lower.

However, we do not know when that will be.

On an intraday basis, trading stocks like UCO, SCO, VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSEARCA:UWTI) and VelocityShares 3X Inverse Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSEARCA:DWTI) is a pure gamble today.

Usually, the price of oil and the associated ETFs fluctuate in a manner that is very respectful of the technical parameters, so by monitoring price we are often able to take advantage of forthcoming moves quite nicely, but when prices move based on news events like this the associated price movement is sporadic and haphazard.

Therefore, Stock Traders Daily is recommending to its clients that they avoid the temptation to trade these instruments on an intraday basis today.  The risks on both sides of the fence are simply too high.

Importantly, we do expect UCO to fall aggressively and SCO to increase aggressively once this news is quieted, so we would be buyers of SCO with the intention of holding and not trading it on an intraday basis.  Entry levels under $93.00 look good.  At the time this was written that price point was only obtainable in pre-market trading.