September WTI crude oil futures have continued the week's bearish theme throughout the U.S. session. As of now, crude is trading modestly positive, near the $47.00 level. The range is small, 65 ticks. So, how do we proceed?

Technicals

A quick look at the technicals shows a pronounced downtrend on the daily timeframe. Large sell offs interrupted by small retracements.

September WTI Crude Oil Futures- Daily Chart

The candlestick pattern is distinct. It will be interesting to see if we break the pattern on today’s close. Here are a few key levels to be aware of:

• 38% of Wednesday’s range $47.17

• Wednesday’s low of $46.67

• Round numbers to the downside of $46.50, $46.25 and $46.00

Over all, my bias is to the bear. As long as crude continues to trade under the 38% level of Wednesday’s range, today’s bottom is suspect. Also, a few key fundamentals:

• WTI volume is becoming diluted. The September contract now trades 70/30 against October. This will lead to choppy price action.

• The lagging US inventory seems to have been ignored by traders this week. Keep an eye on tomorrow’s Baker Hughes rig count. If it is extremely low, then many bears will be looking to exit their positions.

Bottom line: I am awaiting today’s electronic close for some prime levels to trade for Friday’s session. However, there is a cheap short on the board. A short at market, with a stop above the intraday high is good trade location to play the downtrend.

At current levels, this is a 1:1 trade with the stop above 47.11. As always, watch the money management and trade for tomorrow.