Last Wednesday, I noticed the day's upmove in WTI crude oil futures from $95 to $101 was not the start of a new upleg. I noted that the pattern exhibited on the daily chart since the May 7 at $94.63 to Wednesday's high at $100.99 resembled a Bear Flag formation much more than a significant bottom. It had the look of a digestion-consolidation pattern in the lower quadrant of the larger downleg from May 2's $113.97.

The analysis remains unchanged, and still argues for another downleg into the $90-$88 area next, which should also negatively impact the U.S. Oil Fund ETF (USO) as well as oil & gas names.

Only upside continuation that hurdles and sustains above 106.20 will invalidate the current "bearish" outlook.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.