Last Wednesday we told subscribers that the day's upmove in WTI crude oil futures from $95 to $101 was not the start of a new upleg. We 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.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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