Overall, a downwards swing was expected, with a small bounce to about 61.22 expected first. The bounce did not happen. Downwards movement has continued.
Summary: A deeper and longer lasting consolidation looks to be underway, 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. Support may now be about 63.0 and resistance may be about 75.25.
At this time, a downwards swing to support looks likely to be underway. The target for the consolidation to end is 61.12 to 61.22. (Do not expect the swing to move in a straight line, because that is not how price normally behaves within consolidations.)
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New updates to this analysis are in bold.
MAIN WAVE COUNT
The bear market for US Oil looks to be over and a new bull market looks to be in its very early stages. The prior bearish wave count has been invalidated, leaving only this very bullish wave count.
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. At this stage, it has lasted only 11 weeks.
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.
At this stage, there are still multiple structural options for intermediate wave (4) to complete as. They will be separated out into separate charts.
Of all the daily charts, this first chart at this stage has the best look and may have the highest probability.
Intermediate wave (4) may be unfolding as a flat correction. Within the flat correction, minor wave A may be a complete zigzag and minor wave B may be a complete expanded flat correction, a 1.27 length of minor wave A, which is within the most common range of from 1 to 1.38. An expanded flat is indicated.
Expanded flats normally see C waves move substantially beyond the end of their A waves. A target for minor wave C is calculated, which expects it to exhibit a common Fibonacci ratio to minor wave A. This target is very close to the 0.382 Fibonacci ratio of intermediate wave (3).
Minor wave C must subdivide as a five wave structure, and within it minute wave ii may not move beyond the start of minute wave i above 75.26.
Minute wave ii looks complete as a shallow double zigzag. Minute wave iii may now be underway; it may only subdivide as an impulse, and it is likely to look like a five wave structure on the daily chart.
Minor wave C may complete within two more weeks, which would see intermediate wave (4) complete in a total Fibonacci 13 weeks.
Intermediate wave (4) may not move into intermediate wave (1) price territory below 55.24.
FLAT – ALTERNATE
This alternate idea is identical to the first flat wave count with the exception of the degree of labelling. Here, the degree of labelling within intermediate wave (4) is moved down one degree. Minor wave A may be an incomplete flat correction.
The target and expected direction is the same. The upper invalidation point is the same for the short to mid term.
This wave count allows for intermediate wave (4) to be longer lasting. At this stage, it is looking less likely than the first wave count.
Intermediate wave (4) may be unfolding as a double combination.
The first structure in the double may be a completed zigzag labelled minor wave W. The double may be joined by a three in the opposite direction, an expanded flat labelled minor wave X.
The second structure in the double may be either a flat or a triangle, with a flat correction much more likely, so that is what will be expected.
Within the flat correction of minor wave Y, minute wave a must subdivide as a three. Minute wave a may be subdividing as a zigzag, and within it minuette wave (b) may not move beyond the start of minuette wave (a) above 75.26.
Within the flat correction of minor wave Y, when minute wave a is a completed three wave structure, then minute wave b must unfold upwards and must retrace a minimum 0.9 length of minute wave a. Minute wave b at that stage may make a new high above the start of minute wave a at 75.26.
Minor wave Y would most likely end about the same level as minor wave W at 64.22, so that the whole structure takes up time and moves price sideways.
COMBINATION – ALTERNATE
This alternate idea for the combination again moves the degree of labelling within intermediate wave (4) all down one degree.
The first structure in a double combination may be an incomplete flat correction labelled minor wave W.
When minor wave W is complete, then minor wave X should unfold as a three wave structure upwards, most likely a zigzag. Minor wave X has no minimum requirement nor no maximum allowable length.
Thereafter, minor wave Y would most likely be a zigzag and would most likely end about the same level as minor wave W, so that the whole structure takes up time and moves price sideways.
A double combination with this degree of labelling could take several more weeks to unfold. At this stage, this looks to be too time consuming considering the proportion between intermediate waves (2) and (4) on the weekly chart.
Intermediate wave (4) may be unfolding as a triangle.
Within the triangle, minor wave A should be seen as over at the last low. This is problematic because it does not fit as a single zigzag. It can be seen complete as a double zigzag, but this looks forced because minute wave w does not look like a very clear three.
If minor wave A is a double zigzag, then all remaining triangle sub-waves must subdivide as single structures. All but one of them must be zigzags and one triangle sub-wave may be another type of corrective structure.
Within the triangle, minor wave C may be unfolding as a zigzag; within it, minute wave b may not move beyond the start of minute wave a above 75.26.
Minute wave b may be complete. Minute wave c may now be unfolding lower as an ending expanding diagonal.
Minor wave C may not move beyond the end of minor wave A below 63.60.
A triangle may take several more weeks to complete. They are often very time consuming structures.
Click chart to enlarge. Chart courtesy of StockCharts.com.
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.
July saw another red monthly candlestick with the balance of volume downwards, but the market fell of its own weight; it was not supported by volume. This is not necessarily bullish, but it does point to a consolidation as somewhat more likely 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.
ADX now indicates no clear trend; the market may be consolidating.
Expect swings from support to resistance and back again, using Stochastics to indicate when each swing may end.
Price is moving lower. Stochastics is again approaching oversold. Look for more downwards movement until price reaches support and Stochastics reaches fully oversold, along with (possibly) exhibiting some bullish divergence.
On Balance Volume has very recently made new all time highs on the daily chart. This is extremely bullish for the bigger picture and offers support to the wave count at the monthly chart level.
Published @ 07:41 p.m. EST on 11th August, 2018.