When I recommended the oil trade on August 30, oil was at 46. I was not expecting the scary drop the following day obviously, but in hind sight that was near the low. Had you asked me yesterday morning about taking the oil position, I would have recommended holding off as I felt oil was potentially painting a bear flag. Oil closed the day strong however, and now I believe we should have a few more good days.
So here is the quandary. I am bullish oil as I have said, but the oil cycle is getting long in the tooth. Oil cycles typically last 40 - 60 days trough to trough. Today marks day 26. By the time oil reaches $50. it will be 5 more trading days, getting us into day 31. If this cycle last 40 days, those weeks following could be a scary ride.
So the point of this post is that we should expect a move lower in the next couple of weeks. When trading with leveraged instruments, it is perilous to become greedy. We will be much better to exit this trade early. I will be recommending an exit most likely by the end of next week.