Oil Prices: This Indicator Says Oil Prices Could Crash 57.1%

This is a message for all those who are bullish on oil prices: be very careful. We could be headed for oil prices of $16.00 per barrel.

Before going into any details, I want to make one thing very clear: I am not an expert in oil prices. My focus is on stocks and precious metals. There are too many factors involved when it comes to the oil market—demand, supply, politics, cartels, trade, wars, and peace. But I do pay attention to the chart. I believe prices can tell much more.

As it stands, oil charts suggest we could see a bearish move ahead, and it will be an ugly one. Please look at the chart of oil prices below. Pay close attention to the blue lines and the yellow circled areas.

Chart courtesy of www.StockCharts.com

The blue lines represent the Fibonacci retracement. Technical analysts use this indicator to find possible support and resistance levels. They look at retracement levels of 38%, 50%, and 62% as key levels. The yellow circles on the chart above are the 50% retracement levels.

With this said, noticed something interesting?

You see, over the last year, oil prices have acted in a chaotic but predictable way. Consider the decline in oil prices between late June and late August. Oil collapsed from around $62.00 to $40.00. Then, it retraced back a bit—to the Fibonacci retracement level of 50%.

As soon as that level was reached, we saw another move to the down side and oil prices settled around $27.50 per barrel.

Since then, they have been on an upside move. Currently, oil prices stand at the 50% retracement level.

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