Oil rallied for over 2 weeks since emerging from the May 5th low. Earlier this week oil began to close above the upper daily cycle band to signal an end to the daily downtrend and that oil may have left behind an intermediate cycle low.
Oil was getting stretched above the 10 day MA and was due for a cooling off or consolidation. Instead, oil delivered a surprise move lower on Thursday. Generally surprise moves occur in the direction of the trend and Thursday’s 4.79% drop indicates that oil is still in a bearish trend.
Thursday’s move lower eases the parameters for forming a daily swing high. A break below 48.53 forms a daily swing high. If oil forms a daily swing high then it will also threaten closing below the lower daily cycle band. A close below the lower daily cycle band indicates that the intermediate cycle is in decline. You will notice that the previous 2 times that oil closed below the lower daily cycle band that oil ended up forming failed daily cycles.