Short Oil Now

About 2 months ago, I made a bold call "We'd likely see $40 oil before $20 in the weeks ahead". This was at the time that oil was trading around $30 and almost all the talking heads were very bearish about oil, saying that oil would go towards $20 soon. Naturally in this kind of situation, no one would agree with me and I immediately got some challenges from friends in the chat group,  arguing why the fundamentals would not support a higher oil and why oil should only go down. Actually my friends were right, but only for a very brief moment since oil did go down almost immediately after that and touched $27. While my timing was a bit off, my prediction turned out to be quite on the spot: oil has surprised almost everyone in the past few weeks and started a very strong rebound and closed above $41 just a few days ago. Of course, now the sentiment has changed and you start to hear more and more people talking about oil going up to $50 or even $60. Really?


Just to be clear, I'm not arguing that oil will not go up to $50-60 but I certainly do not think oil will go that high in the near future. There is simply no fundamental to support that. Rather, I think oil will likely go down towards $30 or even lower in the weeks ahead, supported by the technical analysis. You see oil has been clearly overbought at the moment and is bouncing against its multi-year downward trend line. Looking at the COT report on future trading, the smart money of those commercial traders are aggressively shorting oil. The chance is really not good to go long oil at this kind of setup. I'm shorting oil now. You can directly short oil via USO, or via the energy stocks ETF like XLE. More aggressive traders can even buy the leveraged inverse ETF for oil and gas, DUG. Of course there is no guarantee and I could be wrong, especially in terms of timing but I'm fairly confident that oil will go much lower from here as its next move.