The NYMEX oil price breakout above the resistance level near $58 failed to develop into a sustained uptrend.

Instead, the consolidation period saw oil move between $58 and $62. The fall below the new support level near $58 was rapid. The fall also moved quickly below the support level near $48, a rapid collapse of support that is a very bearish sign.

The downside target now is near $38, which will be along-term and sustained support level. This area, a major technical feature in the NYMEX oil chart, acted as support in 2004 and 2008 and as a resistance level in 2000 and 2003.

When oil collapsed from $110 it formed a double-bottom pattern near $45, a pattern that is often associated with a trend reversal.

Measuring the height of the double-bottom pattern gave an upside target near $61. This target was achieved but the pattern did not develop into a new sustained uptrend.

But the double-bottom near $45 is not a confirmed substantial support level and the current price retreat quickly moved below $45 towards the historical support level near $38. We use the ANTS analysis and trading method to capture both short-term and longer-term trading opportunities.

NYMEX oil trades in broad trading bands, with the trend behavior defined by these trading bands. The fall in oil from near $110 was very rapid with short-lived consolidation or pauses near each of the significant support or resistance levels.

The consolidation near $58 continued for 10 weeks and the failure of this long-term consolidation to provide a floor for a new uptrend is, as I said, very bearish.

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On the daily chart the Guppy Multiple Moving Average (GMMA) indicator shows that the short-term group of averages have moved quickly below the lower edge of the long-term group of moving averages. And there is a consistent degree of separation between the long-term GMMA and the short-term GMMA averages. This GMMA trend condition suggests a sustained downtrend move.

When the price reaches the historical support level near $38, traders and investors will look for the short term GMMA to develop "compression and rebound" behavior. This behavior will confirm the strength of support and is necessary for the development of any new uptrend.

Strong and fast downtrends normally do not quickly reverse direction so there is a high probability of a period of consolidation activity around $38. Investors and traders will then watch for the short term group of GMMA averages to compress and move towards the lower edge of the long-term group of GMMA averages. This will signal the beginning of consolidation behavior which may last many months.