The channel about intermediate wave (C) is finally breached.
Summary: I am expecting a fifth wave down. Typical of commodities, this may be swift and strong and may offer an excellent trading opportunity. I am looking for an entry point to hold a trade for weeks / months as this fifth wave unfolds.
Changes and additions to last analysis are italicised.
This wave count sees US Oil as within a big super cycle wave (II) zigzag. Cycle wave c is highly likely to move at least slightly below the end of cycle wave a at 32.70 to avoid a truncation. Cycle wave c may end when price touches the lower edge of the big teal channel about this zigzag.
Within cycle wave c, primary wave 5 is expected to be extended which is common for commodities.
Primary wave 4 may not move into primary wave 1 price territory above 91.76.
Draw a channel about this unfolding impulse downwards. Draw the first trend line from the lows labelled primary waves 1 and 3 then push up a parallel copy to contain all of primary wave 2. Copy this maroon trend line carefully over to the daily chart.
Primary wave 4 moved higher. Again it may be a complete expanded flat correction.
Draw a channel about intermediate wave (C) using Elliott’s second technique: draw the first trend line from the lows labelled minor waves 2 to 4 then place a parallel copy on the high labelled minor wave 3. Downwards movement has breached the lower edge of this trend channel.
Now that the channel about intermediate wave (C) is again breached, I will wait for a throwback, maybe on Monday, and use the 15 minute chart below to find an entry point. My usual approach is to set a stop using the Elliott wave invalidation point (and so to adjust my position size to keep risk minimal). In this instance, the invalidation point is at 61.82, and if the trade is positive within the first 24 hours, then I will move my stop to just beyond my entry point (on the positive side) so that if price goes against me I have no loss, but a tiny profit and will then wait for the next possible opportunity to enter.
My concern today is the volume which has been declining for the last three down days, so volume does not support a downward trend.
Side note: I have a new broker I am trialling, but I’m not happy with their roll over fees. I prefer long term trades (I’ll hold them for weeks or months) so the roll over fees really are a concern. But this new broker allows to trade US Oil, so I’m wondering if I should hold a long term position for the duration of primary wave 5 down with them, if it turns out to be that US Oil is in a typically strong extended fifth wave. Therefore, if any members or readers in New Zealand or Australia can recommend a broker please let me know. Thank you.
To find an entry point this is the technique I use.
1. The last move against the expected trend (in this case the last upwards move) must subdivide as a clear three. So far this first condition is not met in this instance.
2. Price must sit within the two Bollinger bands on the opposite side to the expected / traded direction. In this case I expect price to move down, so I want to wait until price is within the upper two Bollinger bands.
3. I sometimes also wait after that to see a smaller bar on the MACD histogram and enter as soon as I see that happen.
On Monday I expect price to move higher and complete a clear three up. Because volume is not supporting this recent price drop of the last three days, I will be very cautious in my entry and may not enter Monday. I may wait another few days yet, but either way I expect we are very close now to a good entry point for a short on US Oil for a primary degree fifth wave.
Price keeps breaking below upwards sloping trend lines. The two aqua blue lines are drawn using Magee’s approach as outlined in the classic “Technical Analysis of Stock Trends”. These were both breached days ago.
The other trend lines are my own.
It is concerning that ADX is declining and is now below 15. There is no clear trend indicated. However, ADX can sometimes be a lagging indicator. At the start of primary wave 3 I note that it was 20 days from the high before ADX indicated the downwards trend.
The shorter EMA still needs to cross below the longer EMA, and price needs to cross below the longer EMA before full confidence in a downward trend can be had.
There is slight negative divergence between price trending higher (higher lows) and On Balance Volume very slightly lower (almost horizontal). This negative divergence is so slight it may not be reliable.
While price has been moving sideways in a narrow range, volume is declining (aqua blue trend lines). The highest volume day was a down day. I am concerned that the last three days downwards movement has occurred on declining volume, so we may yet see a strong bounce up before the new downwards trend begins in earnest.
This analysis is published about 07:17 p.m. EST.