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Light Sweet Crude Is Now Trending Downward

Light sweet crude (CL) is in a downtrend and offering potential short trades near resistance on rallies.

The high in 2014 near 107.50 (106.64 on September contract depicted below), now a long way away, is lower than the 112.24 high seen in 2013. This provides some longer-term credibility to the current slide.

The September contract was rallying till June, but in July a sharp shift lower broke the trendline. Since then the price has been trending lower.

Figure 1. Light Sweet Crude (CL - September Contract)


The short-term downward trendline intersects just below a $100 providing an area of potential resistance on bounces. $102 is a stronger resistance area -- a move to that region would break the short-term downward trendline, but the price would still be making overall lower swing lows and lower swing highs.

These resistance areas provide short entry points if it's believed the downtrend will continue. If the price drops below 94, the overall target is in the 90 region for this downtrend.

A rally back above $104 on the September contract would stop out many of the traders in short positions, and could indicate an upward trending move. If that occurs, the outlook will need to be re-addressed.

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