A month ago we looked at NYMEX oil and anticipated the development of an inverted head-and -shoulder pattern on the chart, and noted that if this pattern developed it would signal a downtrend reversal.
At the time, we specified the type of future price activity that would confirm the inverted head-and-shoulder pattern. Three future features were needed for confirmation: The first was a continuation of the rally with a move above $48 towards historical resistance near $58, the second a rally collapse and a retest of the $48 area as a support area, and third was another rally away from support near $48 and a move above resistance near $58.
This activity has failed to develop and there is now a low probability this pattern will be completed.
Traders were alert for the development of patterns that would signal the end of the downtrend. But now traders need to be alert for behavior that signals a continuation of the downtrend with a downside target near $28.