Not Too Shabby

Recently, I blogged about holding on to a security during the US economic bailout crisis. I can now reveal that I was holding shares of DUG, the ultrashort ETF for US oil industry stocks. I sold my shares yesterday and locked in a 42% gain.

I was confident enough in the weakening demand for oil (due to turbulence in the general economy) that I did not check up on my position while I was out of town last week on my retreat. Yet I knew the market might rally once the wall street bailout went through. It turns out that the turmoil in the European credit markets bought my ETF a little more upside Monday and Tuesday.

Stocks headed lower yesterday as well. But when the Fed announced a rate cut coordinated with rate cuts in Europe, the S&P 500 seemed to rally and at 2:30 PM, DUG was trading near the bottom of its intraday range on higher trading volume. In other words, it looked like more people who held DUG were starting to doubt its value than the ones who felt it would go higher. With all the uncertainty in the economy, I decided to pull the trigger and lock in my gain.

Maddeningly, the general markets turned bearish from 3:30 to 4:00 PM and DUG ended up right in the middle of its trading range today - not a clear "sell" signal after all. Nevertheless, I feel good about following the instincts I've developed as a result of studying the market over the past 10 years. That goes for holding it last week as well as selling it yesterday.