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Oil Points Lower

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.

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