US OIL: Elliott Wave and Technical Analysis | Charts – February 21, 2020

Upwards movement has continued for another week exactly as expected. The main wave count still has the same target and expects a breakout from this consolidation to be downwards, when the upwards swing is complete.

Summary: Both the bullish and bearish Elliott wave counts expect upwards movement to continue for a few more weeks. The target for the main bearish count is at 65.83.

MAIN ELLIOTT WAVE COUNT – BEARISH

MONTHLY CHART

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The basic Elliott wave structure is five steps forward and three steps back. This Elliott wave count expects that US Oil is still within a three steps back pattern, which began in July 2008. The Elliott wave count expects that the bear market for US Oil continues.

This Elliott wave corrective structure is a double zigzag, which is a fairly common structure. The correction is labelled Super Cycle wave (II).

The first zigzag in the double is complete and labelled cycle wave w. The double is joined by a three in the opposite direction labelled cycle wave x, which subdivides as a zigzag. The second zigzag in the double may now have begun, labelled cycle wave y.

The purpose of a second zigzag in a double zigzag is to deepen the correction when the first zigzag does not move price deep enough. To achieve this purpose cycle wave y may be expected to move reasonably below the end of cycle wave w at 26.06. When primary wave B may be complete then the start of primary wave C may be known and a target may be calculated.

Cycle wave y is expected to subdivide as a zigzag, which subdivides 5-3-5.

Cycle wave w lasted 7.6 years and cycle wave x lasted 2.7 years. Cycle wave y may be expected to last possibly about a Fibonacci 5 or 8 years.

Primary wave B may not move beyond the start of primary wave A above 76.90.

WEEKLY CHART

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This weekly chart shows all of cycle wave y so far.

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.

Primary wave A may be a complete five wave impulse at the last low.

Primary wave B may be a double combination: zigzag – X – flat. Intermediate wave (W) fits as a zigzag. Intermediate wave (Y) may be unfolding as a flat correction.

Within intermediate wave (Y), minor wave A may be complete. Minor wave B may be a complete expanded flat. Minor wave C may now move upwards to complete the flat correction of intermediate wave (Y).

Within the flat correction of intermediate wave (Y), minor wave C would be very likely to make at least a slight new high above the end of minor wave A at 60.93 to avoid a truncation and a very rare running flat.

When primary wave B may be complete, then a downwards breakout would be expected for primary wave C.

Primary wave B may not move beyond the start of primary wave A above 76.90.

DAILY CHART

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This daily chart shows the end of intermediate wave (Y).

Intermediate wave (Y) may be subdividing as a flat correction. Within the flat, minor waves A and B both subdivide as threes. Minor wave B at 1.13 the length of minor wave A is within the most common range of 1 to 1.38. The target calculated for minor wave C expects it to exhibit the most common Fibonacci ratio to minor wave A.

A new high above 54.38 could not be a second wave correction within minuette wave (v) within minute wave c, so at that stage minute wave c and minor wave B would most likely be complete.

There may now be within minor wave C a series of three overlapping first and second waves complete. An increase in upwards momentum may begin over the next very few weeks. 

Subminuette wave ii may not move beyond the start of subminuette wave i below 50.89.

ALTERNATE ELLIOTT WAVE COUNT

MONTHLY CHART

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It is possible that the bear market is over for Oil and a new bull market has begun.

For a bullish wave count for Oil, the upwards wave from the major low at 26.06 in February 2016 must be seen as a complete five wave impulse. This is labelled cycle wave I.

Cycle wave II may be a complete zigzag at 0.679 the depth of cycle wave I.

A target is calculated for cycle wave III to reach a common Fibonacci ratio to cycle wave I.

Within cycle wave III, no second wave correction may move beyond the start of its first wave below 42.37.

WEEKLY CHART

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Cycle wave II does look best as a three. This is the only part of this wave count that has a better look than the main wave count, which sees this downwards wave as a five.

The upwards wave of primary wave 1 within cycle wave III must be seen as a five wave structure for a bullish wave count to work. This movement at lower time frames does not subdivide well as a five; this reduces the probability of this wave count.

Cycle wave III may only subdivide as an impulse. Within cycle wave III, so far primary waves 1 and 2 may be complete. If it continues any lower, then primary wave 2 may not move beyond the start of primary wave 1 below 42.37.

A target calculated for primary wave 3 expects it to exhibit a common Fibonacci ratio to primary wave 1.

DAILY CHART

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Primary wave 2 may now be a complete double combination.

Primary wave 3 may have begun. It may only subdivide as an impulse.

Intermediate wave (1) within primary wave 3 may only subdivide as a five wave motive structure, most likely an impulse. There may now be within intermediate wave (1) a complete series of three overlapping first and second waves. An increase in upwards momentum may begin.

Minuette wave (ii) may not move beyond the start of minuette wave (i) below 50.89.

TECHNICAL ANALYSIS

MONTHLY CHART

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There is now double bullish divergence between price and On Balance Volume. This supports the alternate Elliott wave count.

Overall, price has been moving sideways for a few months now. Within this sideways movement, the downwards month of May has greatest range and volume; this supports the main Elliott wave count. Upwards movement for December lacks support from volume. Now downwards movement for January exhibits increased range and support from volume. The volume profile remains bearish; this supports the main Elliott wave count. More weight is given to this evidence than to divergence with On Balance Volume, as that tends to be a little less reliable.

WEEKLY CHART

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Price is consolidating, swinging from support to resistance and back again. Support is about 50 – 51 and resistance is about 66. A downwards swing may now be over; price reached support and Stochastics reached oversold. A bullish signal last week from On Balance Volume is reasonable as the support line is long held, tested multiple times and close to horizontal.

It is now reasonable to expect an upwards swing to resistance has begun, indicated by a bullish candlestick pattern at support while Stochastics was oversold.

When price consolidates, each swing is normally very choppy and overlapping. Do not expect price to move in a straight line.

A lack of support from volume this week for upwards movement is not concerning. It may indicate a small pullback to again test support could unfold here.

DAILY CHART

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The weekly time frame is best to view the larger consolidation. This daily time frame focusses more on each swing within the larger consolidation.

The downwards swing at this time frame is viewed as a downwards trend. The trend reached extreme. Stochastics and RSI reached oversold. Thereafter, a bullish candlestick reversal pattern that has support from volume suggests a trend change. This supports the Elliott wave analysis.

Friday’s candlestick has a long lower wick, which is bullish for the short term.

Published @ 08:09 p.m. EST.

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