Downwards movement was expected, but without a breach of the channel on the daily chart this expectation did not have substantial confidence.

Summary: Another bearish candlestick reversal pattern with support from volume while the upwards trend has reached very extreme (at the daily chart level) suggests the risk of a multi-week pullback or consolidation here is still very high. This week RSI now exhibits bearish divergence. A target for support is first at 52.29.

A breach of the best fit channel would add substantial confidence in a trend change and the start of a multi-week pullback or consolidation.

The larger trend remains up.

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

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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

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

Use the best fit channel for confidence in this short-term wave count. 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 add substantial confidence in a trend change.

The 0.382 and 0.618 Fibonacci ratios would be targets for primary wave 2. The 0.382 Fibonacci ratio is the first target. As price approaches the first target and if the structure may be complete, then it may end there. If price falls through the first target or the structure is incomplete when it gets there, then the second 0.618 Fibonacci ratio may be used as the next target.

Primary wave 2 may be a multi-week pullback or consolidation.

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. Again, this weekly candlestick ends with a long upper wick, which is bearish. On Balance Volume is now also at resistance.

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.

This week another bearish candlestick pattern, an Evening Star, should again be given weight. This is a stronger pattern than last week’s Dark Cloud. This week also RSI now exhibits bearish divergence between swing highs.

Watch On Balance Volume next week for a signal. If it breaks below support before price breaks below the channel on the daily Elliott wave chart, then that would be a bearish signal.

Published @ 06:52 p.m. ET.

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New updates to this analysis are in bold.