It looks like at the end of this week a Bearish Engulfing pattern may be completing on the weekly chart. There is also a Bearish Engulfing candlestick reversal pattern on the daily chart. This supports the main Elliott wave count.

Summary: The main Elliott wave count expects downwards movement may continue for another few weeks to a target zone at 54.86 – 55.94. Thereafter, the next target is at 46.76 if price keeps falling.

The alternate Elliott wave count expects the upwards trend may have already resumed.

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

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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.

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 to the downside, which is a typical look for the end of a movement for a commodity.

The upper edge of the channel may provide resistance. Price is reacting down from the upper edge of this channel.

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.

This week the degree of labelling within Super Cycle wave (III) is moved down one. Cycle wave I within the impulse may be incomplete. 

Within cycle wave I: Primary waves 1 and 2 may be complete, and primary wave 3, which may only subdivide as an impulse, may have begun.

Within primary wave 3: Intermediate wave (1) may be complete, and intermediate wave (2) may still be unfolding. Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 33.65.

DAILY CHART

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Intermediate wave (2) would most likely subdivide as a zigzag. Minor wave A within the zigzag may be a complete impulse. Minor wave B may have continued higher as a double zigzag. If minor wave A is correctly labelled as a five wave impulse, then minor wave B may not move beyond its start above 67.97.

Minor wave C may now continue lower for a few weeks. It must subdivide as a motive structure, most likely an impulse.

Intermediate wave (2) may last for several weeks.

As price approaches the first target zone at 54.86 to 55.94, and if then the structure is complete and technical analysis indicates a low may be in place, then it may end there. But if price keeps falling and / or the structure of intermediate wave (2) is incomplete, then the 0.618 Fibonacci ratio at 46.76 would be the next target.

Labelling within intermediate wave (2) may still change as it unfolds and alternate wave counts for the short-term structure may need to be considered. There are several different structures that intermediate wave (2) may unfold as.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 33.65.

ALTERNATE DAILY CHART

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It is possible that intermediate wave (2) is over as a brief and shallow zigzag.

This wave count must see the downwards wave ending on 23rd of March as a three, but this movement looks best as a five. This reduces the probability of this wave count.

If intermediate wave (3) has begun, then minor wave 1 within it may be a complete leading expanding diagonal. Leading expanding diagonals are less common than impulses. This further reduces the probability of this wave count.

Minute wave ii within minor wave 3 may not move beyond the start of minute wave i below 60.62.

SECOND ALTERNATE WEEKLY CHART

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This second alternate wave count considers the possibility that primary wave 3 may have been over at the last high.

Primary wave 3 is close to equal in length with primary wave 1; it is 0.79 longer than primary wave 1.

Primary wave 4 may be continuing as a zigzag. The daily chart for this alternate wave count would look the same as the main daily chart above, the degree of labelling would be one degree higher.

SECOND ALTERNATE DAILY CHART

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Primary wave 4 may be continuing further as a zigzag. Primary wave 4 may not move into primary wave 1 price territory below 43.77. This second alternate daily chart is now essentially the same as the main daily chart except the degree of labelling is one degree higher.

TECHNICAL ANALYSIS

WEEKLY CHART

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

The Bearish Engulfing pattern supports the main Elliott wave count this week.

DAILY CHART

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

There is also a Bearish Engulfing pattern on the daily chart, which has support from volume. This supports the main Elliott wave count.

Published @ 05:10 p.m. ET.

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New updates to this analysis are in bold.