Why Oil Prices Are Headed Even Lower

I track the price of oil closely, and even though it’s been tough to predict price movements due to the volatility that comes with headlines out of OPEC meetings or the latest crude numbers, the commodity still shows clear trends.

Trendlines​ are one of my favorite technical analysis tools. A key support or resistance level is a pivotal moment for a stock or commodity, and it is no different for the price of oil.

Since bottoming in February 2016, oil has languished. It made a surge higher over the following months but has been in a volatile drift lower since.

More recently, crude bounced lower directly off of a key resistance trendline, as indicated by the chart below of the United States Oil Fund ETF (USO), which holds near-month NYMEX futures contracts on WTI crude oil.

Alone, this looks bearish. But when we zoom out, we get an even more bearish chart. That’s because practically any upward trend the commodity has tried to grasp onto has been blown through.

The blue trendline was a critical level I was tracking. It had been tested as support three times – the first two touches don’t technically count since that is what formed the line to begin with. And once it broke below that support level, it meant more selling was coming.