Why oil prices have not yet bottomed

With oil prices teetering around $46 a barrel, Cramer turned to the charts of technician Carley Garner, the co-founder of DeCarley Trading.

In January, Garner said that the price of crude was stuck trading between the mid-forties and mid-fifties. Sure enough, after rallying to $55 in April, oil dipped back down to the mid-$40s on Tuesday.

First, Cramer turned to Garner's chart tracking West Texas Intermediate crude (New York Mercantile Exchange: @CL.1) over the last six months.

Garner noticed that the Williams Percent R oscillator, an indicator created by trading guru Larry Williams that shows when securities are overbought or oversold, put oil in oversold territory.

The Relative Strength Index, a key momentum indicator shown just below the Williams oscillator, showed the same. In short, Garner thinks the market could see oil tick even lower before bouncing. She noted that oil has two floors of support, at $43 and just over $40 a barrel, and if either holds on the next leg down, crude could start climbing back to $50.

"Remember, this is how it's been for months," Cramer noted. "We sell off to the $40s then we bounce right back to the $50s, over and over and over."

Source: Bloomberg

Trader I. Ivanov

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