Last week’s analysis expected an upwards swing to continue at least for the short term, which could make a new high above 72.90. Price has moved higher to reach 74.46 for the week.
Summary: For the short term, while there is no candlestick reversal pattern, assume upwards movement shall continue until a reversal pattern or a long upper wick develops. When that happens, then expect the upwards swing has ended and a deep downwards swing may begin.
A deeper and longer lasting consolidation may have begun, which may last about 13 to 21 weeks in total. It should remain above 55.24, and the target is about 61.12. The consolidation will not move in a straight line; it may swing from resistance to support and back again in large swings. Once resistance and support are identified, then a swing trading system may be employed by more experienced traders. Support may now be about 63.0 and resistance may be as high as 72.5 to 73.0.
Always practice good risk management as the most important aspect of trading. Always trade with stops and invest only 1-5% of equity on any one trade. Failure to manage risk is the most common mistake new traders make.
New updates to this analysis are in bold.
MAIN WAVE COUNT
It is possible that the bear market for Oil is over and a new bull market is in the very early stages.
A huge zigzag down to the last low may be complete and is labelled here Super Cycle wave (II).
Cycle wave b must be seen as complete in August 2013 for this wave count to work. It cannot be seen as complete at the prior major swing high in May 2011.
Cycle wave b is seen as a zigzag, and within it primary wave B is seen as a running contracting triangle. These are fairly common structures, although nine wave triangles are uncommon. All subdivisions fit.
Primary wave C moves beyond the end of primary wave A, so it avoids a truncation. But it does not have to move above the price territory of primary wave B to avoid a truncation, which is an important distinction.
If cycle wave b begins there, then cycle wave c may be seen as a complete five wave impulse.
Super Cycle wave (III) must move beyond the end of Super Cycle wave (I). It must move far enough above that point to allow room for a subsequent Super Cycle wave (IV) to unfold and remain above Super Cycle wave (I) price territory.
Cycle wave I may be incomplete. It may be unfolding as an impulse and may have now moved through the middle portion. Commodities have a tendency to exhibit swift strong fifth waves, and this tendency is especially prevalent for third wave impulses. Intermediate wave (5) to end primary wave 3 may be very swift and strong, ending with a blow off top.
When cycle wave I is complete, then cycle wave II may be a deep correction that may not move beyond the start of cycle wave I below 26.06.
Data from FXCM for USOil does not go back to the beginning of Super Cycle wave (I). Without an accurate known length of Super Cycle wave (I) a target cannot be calculated for Super Cycle wave (III) to end using Fibonacci ratios. The target for Super Cycle wave (III) may be calculated when cycle waves I, II, III and IV within it are complete. That cannot be done for many years.
Intermediate wave (3) may now be complete. There is no Fibonacci ratio between intermediate waves (1) and (3), and intermediate wave (3) is longer than 1.618 the length of intermediate wave (1).
This wave count fits with classic technical analysis at the monthly and daily chart levels.
Intermediate wave (2) was a deep double zigzag. Given the guideline of alternation, intermediate wave (4) may be expected to most likely be a shallow flat, triangle or combination. It may be about even in duration with intermediate wave (2), or it may be a little longer because triangles and combinations are more time consuming structures.
In the first instance, a Fibonacci 13 weeks may be expected for intermediate wave (4). If about that time the structure is incomplete, then the next Fibonacci number in the sequence at 21 will be expected.
Intermediate wave (4) may find support about the lower edge of the black Elliott channel. It may end within the price territory of the fourth wave of one lesser degree; minor wave 4 has its territory from 66.65 to 59.13.
If intermediate wave (4) unfolds as a double combination, flat or triangle, then the first wave down within it would be a three wave structure and most likely a zigzag.
All of a flat, combination or triangle may have within them a new high above the start of intermediate wave (4) at 72.90 as in an expanded flat, running triangle or wave X of a double combination. There can be no upper invalidation point for this reason.
It is impossible at this stage to tell which of several possible structures intermediate wave (4) may be, only that it is least likely to be a single or multiple zigzag. Focus will be on identifying when intermediate wave (4) may be over.
The zigzag down may be minor wave A within a flat or triangle for intermediate wave (4), or it may be a zigzag within a double combination for intermediate wave (4).
The movement labelled minor wave B or X looks like an expanded flat correction. Minute wave c now fits as a completed five wave impulse. If it is over at this week’s high, then minor wave B or X is a 1.18 length of minor wave A or W. This is within the common range of 1 to 1.38 for wave B of a flat correction.
If intermediate wave (4) is unfolding as a flat correction, then within it minor wave B has now met the minimum 0.9 length of minor wave A.
If intermediate wave (4) is unfolding as a triangle, then there is no minimum requirement for minor wave B within it.
If intermediate wave (4) is unfolding as a combination, then there is no minimum nor maximum length required for minor wave X.
Intermediate wave (4) may not move into intermediate wave (1) price territory below 55.24.
For the short term, although this chart shows an expectation of downwards movement from here, there is no indication from candlesticks at the end of the week that upwards movement is ending. It must be accepted that it is entirely possible that price may move higher still before it turns, and it would mostly likely end at or before 75.68.
If a long upper wick develops in the next few days, then some small confidence that a high is in place may be had.
ALTERNATE DAILY CHART
This alternate wave count is identical to the first daily chart above except for the degree of labelling within intermediate wave (4) which is moved down one degree.
Intermediate wave (4) may be unfolding as a double combination, with the first structure in a double a flat correction labelled minor wave W. Double combinations are very common structures.
The short term expectation for some downwards movement about here is exactly the same for both wave counts. If minute wave b moves higher, then it would most likely end at or before 75.68.
ALTERNATE WAVE COUNT
Within the bear market, cycle wave b is seen as ending in May 2011. Thereafter, a five wave structure downwards for cycle wave c begins.
Primary wave 1 is a short impulse lasting five months. Primary wave 2 is a very deep 0.94 zigzag lasting 22 months. Primary wave 3 is a complete impulse with no Fibonacci ratio to primary wave 1. It lasted 30 months.
There is now little alternation in depth between primary waves 2 and 4. Primary wave 2 is very deep, but primary wave 4 is also now deep. There is inadequate alternation in structure, both are zigzags. The lack of alternation in this wave count must reduce its probability. So far primary wave 4 has lasted 27 months. At this stage, there is still reasonable proportion between primary waves 2 and 4.
Primary wave 4 may not move into primary wave 1 price territory above 74.96.
The wider Elliott channel (teal) about this whole movement may offer support to primary wave 5.
This wave count now expects a huge trend change for a new wave down for primary wave 5, which may last about a year or so. Primary wave 5 would be likely to make at least a slight new low below 26.86 to move below the end of primary wave 3 and avoid a truncation.
An Elliott channel is added to this possible zigzag for primary wave 4. A breach of the lower edge of this channel would provide a very strong indication that primary wave 4 should be over and primary wave 5 should be underway. Look out for some support on the way down, perhaps a short term bounce about the lower edge of the channel.
A new low now below 55.24 would invalidate the main wave count and in turn offer some confidence to this alternate.
It is possible that upwards movement this week is a continuation of minor wave 5. This will fit at the daily chart level.
At this stage, this wave count is looking increasingly unlikely; a daily chart shall no longer be published for it.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Friday’s session is the last session for the month of June, so some conclusions may now be drawn for this last monthly candlestick.
The short term volume profile is bearish: the strongest month in the last few months was the downwards month of May (where the balance of volume was down) and now June shows a decline in volume, so volume has not supported upwards movement here.
For the short term, On Balance Volume is also slightly bearish. This supports the idea that price may be within a correction and not necessarily a continuation of the larger upwards trend.
However, it is entirely possible that this situation could reverse and volume could start to support upwards movement, as has happened back in January 2018.
The larger trend is upwards.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Upwards movement is showing some weakness. At this stage, with the data in hand, this must be read as somewhat bearish.
However, there is as yet no candlestick reversal pattern and no long upper candlestick wicks to suggest a high is in place here. The best approach here may be to assume that an upwards trend remains in place until price proves it has ended.
Published @ 01:26 a.m. EST on 30th June, 2018.