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Now that oil prices have broken key support at $66.00/20 and have followed-through to $63.50 so far, let’s notice that today’s low represents a test of the rising 50-day moving average, which so far has contained the selling pressure. However, let’s also notice that my daily RSI momentum gauge remains pointed sharply lower, which is a warning signal that we should expect oil prices to break the 50 DMA and press lower towards $62.00 and possibly $60.00 thereafter. The Feb-Jul support line now resides at $55.16 in case oil prices find a reason to implode beneath $60. At this juncture, only a climb that sustains above $66.40 will argue that a near-term low has been established. One instrument we follow for playing oil’s downside is the PowerShares DB Double Short Oil ETN (NYSE: DTO), whose intermediate-term measured target zone remains 100-105.
Mike Paulenoff is author of www.MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 15-day Trial!
