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I also explained that the chart of Ultra Oil & Gas ProShares (DIG - commentary - Cramer's Take) was much preferable to the chart of UltraShort Oil & Gas ProShares (DUG - commentary - Cramer's Take), yet it was the chart of DUG that people asked me about on a regular basis. I even joked to someone that when folks started asking me if it was too late to buy DIG and whether they can short DUG, we'd be at the highs. That still hasn't changed. Over the past few days, however, I find my inbox filled with folks hootin' and hollerin' over the chart of Mexco (MXC - commentary - Cramer's Take), an oil company. I don't know what they do, nor do I care. Then yesterday, a very astute reader asked me the last time we'd seen that sort of action.
My initial thought was it reminded me of technology in 1999. But on second thought, I considered it was more recent than that.
Speculation such as this does not come in the early phase of a rally; it is almost always associated with the latter phases. So I went back to the chart of DIG and calculated an upside target. To calculate a target, you take the high of the pattern (120) and subtract the low (80). You then take that net differential and add it on to the breakout (in this case, 100) to get your target (140).
As we near the target zone on DIG and we see speculation in these small-cap names, we know we've seen this story before, and we know the story is closer to a correction than to a new burst forward.
We'll probably like oil all over again after a correction, but up here, it's heading toward frothy.
Overbought/Oversold OscillatorsFor more explanation of these indicators, check out The Chartist's primer.  
At the time of publication, Meisler had no positions in the stocks mentioned, although holdings can change at any time. Helene Meisler writes a daily technical analysis column and TheStreet.com Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.
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