Charts show oil breaking key trend, suggests deeper plunge into bear territory

Wall Street technician Louise Yamada sees more pain coming to the oil markets.

She based her forecast on two oil charts that show U.S. crude is trapped in a downward cycle.

"We've seen the completion of the target from a head and shoulders bottom back in 2015-2016. It went directly up to $78-$79 [a barrel]," she said Thursday on CNBC's "Futures Now." "This has been a severe setback. We were looking for a weakness towards the trend. It's actually broken the trend."

Yamada, who runs Louise Yamada Technical Research Advisors, expects a more structural decline to take place.

"The weekly momentum has been declining for half the year, suggesting that the rally was weakening. And, now we're at the point where the monthly is just kissing for a sell signal," she noted.

West Texas Intermediate (WTI) crude gained 21 cents on Thursday to close at $56.46 a barrel. The commodity, which is in bear territory, is off 21 percent over the past four weeks. She expects the $52 to $53 could act as a temporary support level for crude.

"It's difficult to say whether it will be days or weeks," she said. "This whole equity market has been doing more on the downside than many people expected. We've been cautious for quite a while."

On Wednesday, WTI snapped its longest losing streak ever, down 12 days in a row. Due to the severity of the oil decline, Yamada isn't eliminating the chance of a near-term bounce to the $59 to $60 a barrel. However, she's convinced there's a low probability it'll stick, referring to how crude has traded since its all-time high of $145 a barrel hit back in July 2008.

"[It's a] very interesting confluence of resistance levels that suggest it might be over for the upside for some time to come," Yamada said.

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