Select Page

An intra-week update gave a new target for more downwards movement. Price has continued to move lower towards the target.

Summary: Intermediate wave (1) has proven to be incomplete. The new target for it to end at is 42.10.

Use the best fit channel on the daily chart. Assume more downwards movement to the target while price remains within this channel. A breach of this channel would indicate the possible end to this first wave down and the beginning of a multi-week bounce or sideways consolidation.

The other thing to look for next week is a bullish candlestick reversal pattern on the daily chart.

This trend is now very extreme and exhibits a beginning weakness. It can continue lower however for a reasonable time. Be aware a low is approaching, but not here yet.

The larger picture still sees Oil in a new downwards trend to end reasonably below 26.06.

New updates to this analysis are in bold.



US Oil Elliott Wave Chart Monthly 2018
Click chart to enlarge.

Classic technical analysis favours a bearish wave count for Oil at this time.

The large fall in price from the high in June 2008 to February 2016 is seen as a complete three wave structure. This large zigzag may have been only the first zigzag in a deeper double zigzag.

The first zigzag down is labelled cycle wave w. The double is joined by a now complete three in the opposite direction, a zigzag labelled cycle wave x.

The purpose of a second zigzag in a double is to deepen the correction when the first zigzag does not move price deep enough. Cycle wave y would be expected to move reasonably below the end of cycle wave w to deepen the correction. Were cycle wave y to reach equality with cycle wave w that takes Oil into negative price territory, which is not possible. Cycle wave y would reach 0.618 the length of cycle wave w at $2.33.

A better target calculation would be using the Fibonacci ratios between primary waves A and C within cycle wave y. This cannot be done until both primary waves A and B are complete.

Within cycle wave y, no second wave correction nor B wave may move beyond its start above 76.90.


US Oil Elliott Wave Chart Weekly 2018
Click chart to enlarge.

Cycle wave x is seen as a complete zigzag. Within the zigzag, primary wave C is a five wave impulse and within it intermediate wave 4 is a triangle.

A new low below 51.67 has added confidence in this bearish wave count. At that stage, the bullish alternate was invalidated.

Cycle wave y is expected to subdivide as a zigzag. A zigzag subdivides 5-3-5. Primary wave A must subdivide as a five wave structure if this wave count is correct.

Within primary wave A, intermediate wave (1) may be nearing its end but does not look complete at this stage. When intermediate wave (1) is complete, then intermediate wave (2) may unfold over a few weeks as a sideways choppy consolidation, or a deep sharp bounce.


US Oil Elliott Wave Chart Daily 2018
Click chart to enlarge.

Despite a breach of the narrow channel on last week’s daily chart, price has continued lower this week. The channel is redrawn.

This wave count is supported by MACD. The strongest momentum is the end of the third wave.

Minor wave 5 may exhibit an increase in momentum for a selling climax (behaviour typical of commodities). However, while fifth waves within commodities can be strong, they are not always so. This is a tendency to be aware of, not a certainty.

When the channel is breached by upwards movement, that may be an early indication that intermediate wave (1) may again be complete and intermediate wave (2) may then have begun.

Intermediate wave (2) may be very deep. It should last at least four weeks, so that it shows up on the monthly chart.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 76.90.



US Oil Chart Monthly 2018
Click chart to enlarge. Chart courtesy of

The month of November has a very small lower wick. This is still fairly bearish.

The signal from On Balance Volume is weak because the trend line breached had only two anchor points and a reasonable slope. But it is still a bearish signal.


US Oil Chart Weekly 2017
Click chart to enlarge. Chart courtesy of

This chart supports the Elliott wave count. Oil is within a bearish trend. The trend is not yet extreme.

There is no candlestick reversal pattern and no bullish divergence between price and RSI.

There is room here for price to keep falling.


US Oil Chart Daily 2017
Click chart to enlarge. Chart courtesy of

The trend continues and at this time frame is very extreme. Strong and persistent bullish divergence between price and RSI indicates a low may be approaching.

Flattening ATR indicates the trend may be becoming tired.

Look for a bullish candlestick reversal pattern and / or a breach of the trend channel on the daily Elliott wave chart to indicate this trend may be over for the mid term.

Published @ 06:54 p.m. EST.

Careful risk management protects your trading account(s).
Follow my two Golden Rules:

1. Always trade with stops.

2. Risk only 1-5% of equity on any one trade.