Last week’s analysis of US Oil expected upwards movement for the week, which is what happened.
A new high above 37.75 invalidated the alternate and confirmed the main Elliott wave count.
Summary: The monthly chart remains clear: US Oil needs to move lower to complete a large zigzag structure at Super Cycle degree. In the short term, more upwards movement is required to complete the structure of this correction. Look for price to find resistance at the upper edge of the big maroon channel.
New updates to this analysis are in bold.
MONTHLY ELLIOTT WAVE COUNT
US Oil has been in a bear market since August 2013. While price remains below the upper edge of the maroon channel drawn here and below the 200 day simple moving average it must be accepted that the bear market most likely remains intact.
The structure of cycle wave c is incomplete.
This wave count sees US Oil as within a big super cycle wave (II) zigzag. Cycle wave c has moved below cycle wave a at 32.70 avoiding a truncation. At this stage, as soon as the structure for cycle c could be seen as complete an alternate wave count expecting an end to the Oil bear market would be published. That cannot be done yet because the structure is incomplete. Primary wave 5 has to unfold lower and must complete as a five wave structure. Within primary wave 5, intermediate waves (4) and (5) should show up clearly on the monthly chart.
When the structure is complete and an alternate bull wave count is published, then it would come with the strong caveat that it is an alternate until there is technical confirmation of a trend change. That confirmation would be a breach of the maroon channel or a break above the 200 day moving average, or both.
Within cycle wave c, primary wave 5 is expected to be extended which is common for commodities.
No second wave correction may move beyond the start of its first wave above 50.93 within intermediate wave (3).
Draw a channel about this unfolding impulse downwards. Draw the first trend line from the lows labelled primary waves 1 to 3, then place a parallel copy up not the high labelled intermediate wave (2), so that all movement is contained. Add a mid line. Copy the channel over to the daily chart.
The wider teal green channel is drawn about this whole correction. Cycle wave c may end when price finds support at the lower edge of this channel. But sometimes these channels are breached by C waves, particularly if the C wave has a swift strong extended fifth wave to end it. How price behaves when it gets to the lower teal trend line, and how complete the structure is at that stage, will indicate if price may stop there or if it would continue.
DAILY ELLIOTT WAVE COUNT
Intermediate wave (3) should exhibit stronger momentum than intermediate wave (1). So far it has not. If only minor wave 1 is complete, then the lack of an increase in momentum makes sense.
This wave count would expect primary wave 5 to be extended. This is typical for commodities, so this wave count follows most common tendencies. It should have a higher probability for that reason.
Within primary wave 5, this wave count expects that intermediate wave (3) will be extended. Intermediate wave (5) may or may not be extended.
Within intermediate wave (3), so far minor wave 1 may be complete as an impulse lasting 72 days (no Fibonacci number). Within minor wave 1, there is perfect alternation between the deep expanded flat of minute wave ii and the shallow zigzag of minute wave iv. Minute wave v is the strongest wave, typical of commodities.
Ratios within minor wave 1 are: minute wave iii is 0.82 short of 2.618 the length of minute wave i, and minute wave v has no Fibonacci ratio to minute waves i or iii.
Minor wave 2 may be unfolding as an expanded flat correction. Within minor wave 2, minute wave b is a 1.21 length of minute wave a, within the common range of 1 to 1.38. Minute wave c has passed 1.618 the length of minute wave a and the structure is incomplete. The target was inadequate. The next Fibonacci ratio in the sequence at 2.618 would see minute wave c end about 45, but this target looks too high because it would require a substantial breach of the maroon channel. That channel should provide very strong resistance.
Use the maroon channel. When price comes up to touch it, then the correction may be over. This may see minor wave 2 end close to the 0.618 Fibonacci ratio at 40.28. If it reaches that target, then the maroon channel may be overshot. An overshoot is acceptable, but a full breach is not.
Minor wave 2 should find resistance at the upper edge of the maroon channel which is copied over here from the monthly chart.
Within minute wave c, so far there is still too much overlapping for minuette wave (iii) to be complete. This expects that upwards movement will continue so that the structure of minuette wave (iii) can be resolved as an impulse.
Within minute wave c, the middle of the third wave of micro wave 3 cannot yet be seen as complete at the hourly chart level. There is still too much overlapping. At this stage, it looks like this is being resolved with upwards movement and shallow corrections.
So far corrections along the way up are finding support at the lilac trend line, which is likely to continue.
Minute wave c has made a slight new high above the end of minute wave a at 34.82, avoiding a truncation and a very rare running flat.
When minor wave 2 is complete, then this wave count expect US Oil to move very strongly lower. Minor wave 3 within intermediate wave (3) within primary wave 5 should be the strongest part of downwards movement within the bear market for US Oil.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Price has broken out of a consolidation above 35.30 for two days with upwards movement on increasing volume. This is a bullish breakout. The next line to offer some resistance would be at 38.50. Thereafter, at 40.00 and 43.40.
ADX is above 15 and increasing; the +DX line is above the -DX line. ADX indicates the market is trending and the trend is up.
ATR disagrees as it is flat to declining.
RSI is not yet overbought. There is room for the trend to continue. Only when RSI exhibits divergence with price would an end to the trend be indicted by RSI. In a trending market RSI may remain extreme for periods of time.
Stochastics is also overbought, but in a trending market this oscillator may remain extreme for significant periods of time. Stochastics shows no divergence with price today.
The break above the yellow line is bullish from On Balance Volume.
This analysis is published @ 10:00 p.m. EST.