Oil/Gold Short Setup: Inverted Cup & Handle (XLE/GLD)

Updated

After a steep decline in XLE/, the chart has now formed the highlighted cup & handle.
Combine this with the observation that CPI YoY & Core PCE YoY (USCCPI) are in strong declining trends, which historically correlates negatively with oil (and oil-related equities) and positively with gold.

Executing on this idea: use a lower-vega strategy:

Low (2x max) leverage
Short XLE: directly short sell the shares, or buy inverse ETF (DUG, ERY).
Long GLD: Just buy GLD, or go 2x with UGL. Make sure that it balances your XLE short after accounting for leverage.

Note

(**Why low vega**: VIX seems to be suppressed at this time, which means that even if the price performs to target, your options strategy might severely underperform b/c the expected IVOL bump fails to materialize.)

Note

I'm closing out this trade b/c oil crossed my stops.

BtcPowUpdate

Also on:

Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.