Mad Money

Cramer's charts show there could be more pain ahead for oil

Key Points
  • CNBC's Jim Cramer and technician Carley Garner took to the charts to investigate the likelihood of a further drop or a possible rally in oil.
  • The charts suggest that today's weakness in oil is not the end, says Cramer
Charts show more pain possible for oil
VIDEO1:1001:10
Charts show more pain possible for oil

With U.S. crude falling for the fifth straight day on Tuesday, CNBC's Jim Cramer and technician Carley Garner took to the charts to investigate the likelihood of a further drop or a possible rally.

Garner, the co-founder of DeCarley Trading, thinks a breakdown to $55 a barrel is much more likely from these levels than a breakout up to $80 per barrel. She even sees the possibility of oil dropping into the high $40s.

"The charts, as interpreted by Carley Garner, they suggest that today's weakness in oil is not the end, people. She's saying more pain," the host of "Mad Money" said.

"We've got to take her seriously. She's been too right to ignore."

U.S. West Texas Intermediate Crude closed down $1.15, or 1.7 percent, at $66.73 a barrel on Tuesday.

Garner believes the selloff is justifiable since the earlier rally to over $70 a barrel was due to irrational exuberance.

"Historically, the oil futures market is like a seesaw: traders crowd into one side of the trade and then when it gets overloaded, they flee to the other side en masse," Cramer explained.

"While the recent pullback has lightened up the bullish side of the equation a bit, Garner still thinks that the oil futures market is very heavily over-weighted to the long side and in her view that kind of thing inevitably leads to a big liquidation," he added.

However, that doesn't necessarily mean that liquidation will be immediate.

If oil holds at $60, Garner would be relatively neutral.

"However, she does think that there's a decent chance we could see a quick probe down toward $55, another powerful floor of support," Cramer said. "Less likely: oil could break down into the $40s."

Garner would be positive on U.S. crude in the mid $50s and if it falls to $47.50 or $43.50, she thinks it would be a "screaming buy."

WATCH: Cramer's chart says oil could drop to $55 or possibly lower

Cramer's charts show there could be more pain ahead for oil
VIDEO9:1409:14
Cramer's charts show there could be more pain ahead for oil

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram - Vine

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com