Last week’s analysis expected that US Oil had begun a deeper and longer lasting consolidation. A downwards week with a lower low and a lower high fits this expectation.
Summary: 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 be about 64.0 and resistance may be as high as 72.5 to 73.0.
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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.
This analysis will require alternate daily wave counts over the next few weeks. 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.
At this stage, it looks like a zigzag may be now complete at the last low on the 5th of June. This may be minor wave A within a larger flat or triangle, or it may be minor wave W within a combination.
If intermediate wave (4) unfolds as a flat correction, then within it minor wave B must retrace a minimum 0.9 length of minor wave A. The most common length for B waves within flats is from 1 to 1.38 the length of wave A, giving a common range for minor wave B of 72.90 to 76.20.
If intermediate wave (4) unfolds as a triangle, then there is no minimum nor maximum length for minor wave B.
If intermediate wave (4) unfolds as a combination, then there is no minimum nor maximum length for minor wave X, but they are usually relatively deep.
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.
This wave count now expects a new wave down at primary degree. That should begin with a five down on the daily chart. Within the new wave down, minor wave 2 may not move beyond the start of minor wave 1 above 72.90.
Minor wave 2 may be unfolding as an expanded flat correction. These are very common structures.
Click chart to enlarge. Chart courtesy of StockCharts.com.
The candlestick now completed for the month of May is very bearish. Although price moved higher, the candlestick closed red and the long upper wick is very bearish. Support from volume for downwards movement within the month is bearish.
However, there remains strong bullish divergence between price and On Balance Volume. With On Balance Volume a leading indicator and making new highs above prior highs back in June 2014, price may be likely to follow with new highs above this date.
The larger trend still may be upward, but here a reasonable consolidation may have begun. It is for this reason that the Elliott wave count expects an intermediate degree correction just beginning.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Price has found support here about 64.0.
Declining volume is often a feature of a consolidation. The volume profile looks slightly bullish for the very short term; the last session moved price higher, but the balance of volume was down and the candlestick closed red. Downwards movement within the session had less support from volume than the prior upwards session. In conjunction with the long lower wick on Friday’s candlestick, a green candlestick looks likely for Monday at least.
Stochastics is oversold but does not yet exhibit divergence with price. There is room for price to fall further. Next support is about 62.0.
Published @ 12:44 a.m. EST on 9th June, 2018.