Oil Shock Is A Big Deal For This ETF And That's OK

West Texas Intermediate Futures are clinging to $40 per barrel after dipping below that level earlier Friday for the first time since 2009. The United States Oil Fund (NYSE:USO) has tumbled 5.5 percent this week and is one of the 102 exchange traded funds that, to this point in Friday's session, have hit all-time lows.

Predictably, that is bad news for energy equities. That much is reflected in Friday's new 52-week low list for ETFs. Nearly 240 funds have committed that offense and of that group, 25 are equity-based energy funds. Making matters worse is the fact that the group of 25 does not include a plethora of regional and single-country ETFs with heavy energy sector exposure.

The Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares (NYSE:DRIP) is loving the current oil environment and why not. DRIP, which is not yet three months old, attempts to deliver three times the daily inverse performance of the S&P Oil & Gas Exploration & Production Select Industry Index. That is the underlying benchmark for the widely followed SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP). XOP is down 2.6 percent and is one of the members of the 52-week low club.

Clearly, DRIP is anETF with enviable timing. Returns of almost 115 percent since launch confirm as much, but the rub with a jaw-dropping performance like that in such a small amount of time is the implication that upside from here is limited. Perhaps it's not.

The Relative Strength Index is one of a group of technical indicators known as momentum oscillators. RSI measures the velocity and magnitude of directional price moves and represents the data graphically by oscillating between 0 and 100. The indicator is calculated using the average gains and losses of an asset over a specified time period. The standard look-back for the indicator is 14 periods. The most basic RSI application is to use it to identify areas that are potentially overbought or oversold. Movements above 70 are interpreted as indicating overbought conditions; conversely, movements under 30 reflect oversold conditions. The level of 50 represents neutral market momentum, according to a new note from Direxion.

Knowing that 70 is the RSI level at which a security can be deemed overbought, it could be heartening to energy equity bears that entering Friday, DRIP's RSI was just under 58. Now that is the result of a better than 14 percent RSI increase in just three trading days, but the point is DRIP still is not technically overbought.

Arguably, the biggest headwind facing DRIP is not whether the fund is overbought, but traders viewing oil as oversold, the perception that oil stocks are inexpensive and the inability to resist acting on those impulses. Price action says those scenarios have not come to pass yet, indicating DRIP could soon become overbought and remain that way for some time.