Downwards movement was expected, but price has moved higher.

Two Elliott wave counts are used this week.

Summary: Oil may have found a major sustainable low.

For the mid term, a pullback may end about 28.90. If price keeps rising next week, then a limit may be at 50.42.

When this pullback may be complete, then an upwards trend should resume with increased strength.

ELLIOTT WAVE COUNT

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 has completed a three steps back pattern, which began in July 2008. The Elliott wave count expects that the bear market for US Oil may now be over.

A channel is drawn about Super Cycle wave (II): draw the first trend line from the start of cycle wave w to the end of cycle wave x, then place a parallel copy on the end of cycle wave w. Price has bounced up off the channel. This trend line is breached, which is a typical look for the end of a movement for a commodity.

The upper edge of the channel may provide resistance.

Following five waves up and three steps back should be another five steps up; this is labelled Super Cycle wave (III), which may only have just begun. Super Cycle wave (III) may last a generation and must make a new high above the end of Super Cycle wave (I) at 146.73.

Super Cycle wave (III) may only subdivide as a five wave impulse. New trends for Oil usually start out very slowly with short first waves and deep time consuming second wave corrections. Basing action over a few years may now have begun.

WEEKLY CHART

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Super Cycle wave (III) must subdivide as an impulse. Cycle wave I within the impulse may now be unfolding higher. Cycle wave II may not move beyond the start of cycle wave I below 10.24.

DAILY CHART

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Labels are added for cycle wave I. Primary wave 1 within an impulse for cycle wave I may now be complete.

Primary wave 2 may be unfolding as a flat correction. Intermediate wave (A) within the flat may be a complete zigzag. Intermediate wave (B) may also be a complete zigzag, but it may also move higher. The common range for intermediate wave (B) within a flat is from 1 to 1.38 times the length of intermediate wave (A), giving a range from 40.44 to 42.75.

If intermediate wave (B) is over at this week’s high, then primary wave 2 may be a regular flat. If intermediate wave (B) continues higher to reach 40.74 or above, then primary wave 2 may be an expanded flat.

Primary wave 2 may end about the 0.382 Fibonacci ratio at 28.90.

Primary wave 2 may not move beyond the start of primary wave 1 below 10.24.

ALTERNATE DAILY CHART

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This alternate chart is new.

It is possible that primary wave 1 may be incomplete. Intermediate waves (3) and (4) within primary wave 1 may be complete.

Intermediate wave (3) for this wave count is shorter than intermediate wave (1). So that intermediate wave (3) is not the shortest actionary wave and the core Elliott wave rule is met, intermediate wave (5) is limited to no longer than equality in length with intermediate wave (3) at 50.42.

For this wave count a multi-week pullback would need to begin before or at 50.42.

Primary wave 2 may not move beyond the start of  primary wave 1 below 10.24.

TECHNICAL ANALYSIS

WEEKLY CHART

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

A red weekly candlestick has now been negated by a slight new high for the following week and a green weekly candlestick. The bearishness of the last week is now negated.

The short-term volume profile remains slightly bearish and price remains just below a strong cluster of resistance. With Stochastics entering overbought, the risk of a multi-week pullback remains high.

DAILY CHART

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

Bearish divergence with price and RSI is weak. If price turns down here, then it may be for a multi-week pullback, but the pullback may also not begin right here; it may be another one to very few weeks away.

Published @ 06:46 p.m. EST.

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New updates to this analysis are in bold.