DUG

DUG is a trade that has been setting up for a while now. It is a leveraged Ultrashort ETF on oil and gas.

As with any ETF, especially leveraged, we want to catch them as close as possible to the trend, not during choppy basing, even though that basing may be bullish.

 Dug first came to light as a potential long trade late last year as t formed a bullish descending wedge. Since then it has gone on to create a lateral trading range where we often see bases constructed. The bigger the base, the more potential upside. Another rule of thumb is that wedges retrace their base, in this case, the price pattern implied target is near $70, more then a double. RSI and MACD are both positively divergent.

 The big picture in 3C shows confirmation until late 2010/early 2011 when 3C started making higher lows, despite price making lower lows. Through the lateral consolidation in 2011, 3C has gone into a sharp leading positive divergence.

 The daily chart shows a base pattern similar to a complex inverse head and shoulders bottom with the neckline (breakout) around $31.40-$31.90.

 The hourly chart has been supportive of the most recent rally and volume has picked up on this rally as it should for this price pattern.

In the very near term there is the probability of a pullback, which may offer a better risk/reward set up. Or you may choose to wait for a breakout on volume. There's plenty of room on the upside so 5% here or there isn't a big deal.

I've been watching this trade develop for a long time and it is finally starting to come into its own. This is one you definitely want to have on the watchlist.