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President Trump’s first 100 days in office are taking a toll on oil prices.

Oil is down 20% since Inauguration Day. Some of the decline is due to actions to boost supply.

That includes an executive order declaring a national energy emergency. Among other things, the order sought to expedite permitting for oil and gas projects and opened federal lands to oil drilling.

That comes at a time when U.S. oil production is at 13.1 million barrels a day. That’s close to the record high.

Trump is also placing pressure on the OPEC oil cartel to raise production. The group announced a 411,000 increase in production starting this month. That was a larger-than-expected increase.

But fears are also ramping higher on the demand side. The economic consequences of a trade war could impact oil demand.

Oil’s supply-and-demand dynamic is leading to a major chart breakdown that I warned you about back in January before Trump took office.

So today, let’s break down oil’s chart and see where it could be headed next…

Bearish Pattern Complete

Oil’s pullback shouldn’t come as a surprise. Back in January, I showed you the bearish chart setup developing with oil.

I had this to say back then:

Since September 2023, oil has been creating a pattern called a “descending triangle.”

That’s marked by lower highs during each rally attempt, along with a common support level tested on each pullback.

The downtrend line shows the rallies growing smaller. And support around the $66 level keeps being tested.

The pattern is often bearish. A break of support below $66 would complete the setup.

With various catalysts lining up against oil’s outlook, the descending triangle pattern was completed.

Oil prices staged a sharp drop in early April that took out the $66 level. That came following news of OPEC’s production increase I mentioned above.

So far, the chart breakdown is playing out exactly as expected. Here’s what should happen next…

More Downside in Store?

After falling below support of the descending triangle pattern, oil came back to test that level as resistance.

Take a look at the chart below.

“1” shows the initial drop below the pattern support level at $66.

Following a break from a triangle pattern, it’s common to see the price come back to test that level. That’s exactly what happened at “2.”

From here, oil prices should continue their slide. And there could still be much more downside in store.

You can use the triangle pattern to come up with a price target. You simply take the maximum price range of the pattern and apply it to the breakdown point.

In oil’s case, the descending triangle’s maximum range totaled about $28. Subtract that figure from the pattern’s support level at $66, and you come up with a price target of $38.

That would imply another 37% downside in oil prices potentially.

It’s not a lock that oil will drop by that magnitude. That’s just a guideline of what to watch for based on the chart pattern.

But with the bearish catalysts stacking up against oil prices, you can expect more downside in the months ahead.

Happy Trading,

Larry Benedict
Editor, Trading With Larry Benedict

P.S. As I mentioned yesterday, I’m working on a project to add even more value for you… a way for you to get my live insights on the market action throughout the trading week – for free. I’ll be ready to reveal the details soon, so stay tuned…