About a target at 55.02 to 55.56 a pullback or sideways consolidation was expected this week. Price moved slightly higher to 54.32, falling 0.70 short of the target, and then has moved mostly sideways for the week.

Summary: The final target for the bounce to end is about 63.71.

Some more sideways movement may unfold for the short term before the bounce continues.

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.

MAIN ELLIOTT WAVE COUNT

MONTHLY CHART

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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.

WEEKLY CHART

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This weekly chart is focussed on the start of cycle wave y.

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 now be complete. Intermediate wave (2) may unfold over a few weeks as a sideways choppy consolidation, or a deep sharp bounce. At this stage, it looks more likely to be a deep bounce.

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

DAILY CHART

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Intermediate wave (2) would most likely subdivide as a zigzag and at this stage that is how it will be labelled. However, it may also subdivide as a flat or combination. It is impossible at this stage to know which structure it will unfold as. The labelling within it may change as it unfolds.

If intermediate wave (2) is unfolding as a zigzag, then within it minor wave A must subdivide as a five wave structure. Minor wave A may now be a complete impulse.

A channel is drawn about minor wave A. This channel is this week breached by downwards movement and that may be taken as an indication that minor wave A may be complete and minor wave B may have begun.

Minor wave B may not move beyond the start of minor wave A below 42.37.

Minor wave B may be a complicated sideways correction that does not look complete at this stage. It may be expected to continue sideways or lower next week.

Intermediate wave (2) may be very deep.

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

TECHNICAL ANALYSIS

MONTHLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Lower volume and a slightly bullish long lower wick for December add a little support to the Elliott wave count.

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

This week saw a higher high and a higher low, but the balance of volume was downwards. Within the week, price fell of its own weight.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

For the short term, a lack of volume suggests upwards movement may be limited here.

Published @ 08:30 p.m. EST.

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