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Crude Oil Flashback Update: Bearish Scenario Gains TractionBack on May 13 and then on May 25, we discussed crude oil's ongoing sideways consolidation and highlighted the possibility that the market was nearing the end of a larger corrective pattern. Since then, price action has become increasingly interesting as crude oil starts to break beneath key support levels.
Crude oil is in a bit of a tricky position and has been trading sideways for quite some time now. We have been tracking an abcde triangle within wave B for the last two to three months, which may have actually completed back in May, unless the alternative scenario remains in play.
Now that the market is breaking below the lower triangle trendline, we should watch for additional weakness within a higher-degree wave C decline that can unfold as a lower-degree five-wave bearish cycle. In fact, crude oil may already be in the middle stages of wave (3), which is typically the strongest segment of an impulsive move.
The latest weakness accelerated after President Trump said that the United States was close to reaching an agreement with Iran, raising hopes for a diplomatic resolution and potentially increasing future oil supply. As such, traders should be aware of further bearish continuation, while keeping an eye on short-term intraday pullbacks that could offer temporary relief rallies.
However, there is still an alternative count to consider. If crude oil suddenly rallies back toward the 95 area, then the bearish triangle consolidation may still be ongoing, with wave E yet to unfold before the larger downtrend resumes.
For now, the break beneath triangle support gives the bearish outlook the upper hand, suggesting that wave C lower may already be underway. 
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