The next target for upwards movement to be interrupted was at 58.41. Price this week has passed this target by 1.4.

Summary: Assume price will keep going up while price remains within the best fit channel on the daily chart. The next possible target for an interruption to this trend may be at 61.11.

A breach of the best fit channel would indicate a trend change and the start of a multi-week pullback or consolidation. Likewise, a bearish candlestick pattern on the daily chart should be given much weight; in these extreme conditions, it may signal a trend change.

A longer-term target for a third wave is at 87.90 or 121.43.

Oil may have found a major sustainable low in April 2020.

ELLIOTT WAVE COUNT

MONTHLY CHART

Click chart to enlarge.

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.

Following Super Cycle wave (II), which was a correction (three steps back), Super Cycle wave (III), which may have begun, should be five steps up when complete. 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.

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. 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. If resistance is breached, then the upper edge may provide support for a back test.

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. However, while this is a common tendency, it is not always seen and may not have been seen in this instance. The first reasonably sized pullback may be over already.

WEEKLY CHART

Click chart to enlarge.

Super Cycle wave (III) must subdivide as an impulse. Cycle wave I within the impulse may be complete. Cycle wave II may also now be complete, and cycle wave III upwards may now have begun. If cycle wave II continues lower, then it may not move beyond the start of cycle wave I below 10.24.

There is only one daily chart following this main weekly chart. An alternate is presented below on a weekly chart.

DAILY CHART

Click chart to enlarge.

Cycle wave III may only subdivide as an impulse. Within the impulse: Primary wave 1 may be either complete at this week’s high or may complete very soon, and primary wave 2 may not move beyond the start of primary wave 1 below 33.65.

Intermediate wave (5) within primary wave 1 may now be a complete structure. However, there is as yet no evidence of a trend change in the form of a bearish candlestick pattern or a trend channel breach. The next possible target for intermediate wave (5) to end would be at 61.11, where it would reach 2.618 the length of intermediate wave (1).

Use the best fit channel as a guide to when primary wave 1 may be over. At least one full daily candlestick of downwards movement (not sideways) below and not touching the lower trend line would constitute a breach. A breach of this channel would indicate a trend change. Assume the upwards trend remains while price continues higher and remains within the channel. Be aware though that the trend is now extreme and may end at any time.

When the channel is breached, then draw a Fibonacci retracement along the length of primary wave 1. The 0.382 and 0.618 Fibonacci ratios would be targets for primary wave 2.

When primary wave 1 is complete, then a multi-week pullback or consolidation for primary wave 2 should begin.

ALTERNATE WEEKLY CHART

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This alternate wave count moves the degree of labelling within the start of the bull market down one degree. It is possible that cycle wave I is incomplete.

The target for primary wave 3 is lower than the target on the first wave count.

A daily chart for this alternate would be the same as the daily chart for the main wave count, except the degree of labelling would be one degree lower. The channel would be the same.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Price is within a cluster of resistance and support; this may slow it down.

RSI this week remains overbought, but it may become more deeply overbought before a trend ends. ADX is still not extreme; there is room for this upwards trend to continue.

DAILY CHART

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

At the daily chart level, this upwards trend is now very extreme and RSI is overbought. While this market can sustain extreme conditions for a reasonable time while price continues to move a reasonable distance, conditions are now beginning to be overstretched. The risk of a trend change is now increasing.

In these conditions, a bearish candlestick pattern should be given much weight.

Assume the upwards trend remains until proven otherwise.

Published @ 05:01 p.m. ET.

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1. Always trade with stops.

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New updates to this analysis are in bold.