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Technical Indicators Turn Traders Bearish on Crude Oil

Brent crude slipped again on Thursday, posting its steepest monthly drop since October, having declined by around $7 a barrel in the last three weeks. To some traders on the floor of the exchanges in Chicago and New York, it seems as though crude will only continue to fall.

Brent crude futures dropped 0.63 percent to $111.16 a barrel, having earlier risen to $112.57. On Wednesday, it fell to a low of $111.65, its weakest level since Jan. 22. Crude oil lost 0.93 percent to end at $91.90 a barrel.

(Read More: Brent Crude Oil Hugs One-Month Low After Data)

From a technical perspective, professional trader Rich Ilczyszyn of iiTrader argued the close below $92 a barrel means those with large net-long positions could move capital elsewhere, spurring a further decline in black gold. His net position is currently short oil.

Pro trader Anthony Grisanti is also bearish on crude, at least in the short term. He thinks crude could soon drop to $90 a barrel.

(Read More: CNBC Explains Commodity Futures)

Heat rises from stacks at the Chevron refinery in Richmond, California.
Getty Images
Heat rises from stacks at the Chevron refinery in Richmond, California.

"Look at the fundamentals. It's a very well supplied market," said Grisanti, founder of GRZ Energy, adding a correction in equities means a correction in crude could follow. "The equity market has been a lot stronger and crude is starting to falter up here. The highs are getting lower and as we look at it, it's broke through some trend lines."

From the floor of the Chicago Mercantile Exchange, pro trader Jim Iuorio largely agreed with Grisanti. Looking at the technicals, he thinks crude could soon go lower, especially if it makes new lows. Iuorio said crude's technical pattern "petrifies me," noting it's currently trading in a consolidation pattern, which is just a term used to describe a well-defined range or barrier of trading levels. If crude breaks free from that pattern and breaks support, he thinks it could go much lower.

In turn, Grisanti recommends shorting crude on any pop. He plans to sell the April contract at $93.50 with a target of $91.95 and stop at $94.20.

— By CNBC's Drew Sandholm with Reuters

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