Since last analysis downwards movement continues as expected. Trading advice on how to protect short positions is given for members this week.
Summary: Pull stops on short positions down now to either breakeven or just above the high of the 5th of June at 48.42. If adding to an existing short position now at this bounce, ensure stops on prior positions are at least at breakeven.
The main and alternate wave counts now diverge. The main wave count expects downwards movement to show a strong increase in momentum, and it would be confirmed with a new low reasonably below 43.76. The alternate allows for another final deep bounce before price plummets; the bounce may not move above 52.00.
The alternate has some support from classic technical analysis this week, so look out for another possibly deep bounce here. Protect accounts with stops.
New updates to this analysis are in bold.
MONTHLY ELLIOTT WAVE COUNT
Click chart to enlarge.
Within the bear market, cycle wave b is seen as ending in May 2011. Thereafter, a five wave structure downwards for cycle wave c begins.
Within cycle wave c, at this stage it does not look like primary wave 5 could be complete. That would only be possible if primary wave 4 was over too quickly.
Primary wave 1 is a short impulse lasting five months. Primary wave 2 is a very deep 0.94 zigzag lasting 22 months. Primary wave 3 is a complete impulse with no Fibonacci ratio to primary wave 1. It lasted 30 months.
Primary wave 4 is likely to exhibit alternation with primary wave 2. Primary wave 4 is most likely to be a flat, combination or triangle. Within all of these types of structures, the first movement subdivides as a three. The least likely structure for primary wave 4 is a zigzag.
Primary wave 4 is likely to end within the price territory of the fourth wave of one lesser degree; intermediate wave (4) has its range from 42.03 to 62.58.
If primary wave 4 is incomplete, then it looks like it may not remain contained within the channel. Sometimes fourth waves overshoot channels and this is why Elliott developed a second technique to redraw the channel when it does not contain a fourth wave.
Primary wave 4 is most likely to be shallow to exhibit alternation in depth with primary wave 2. So far it has passed the 0.382 Fibonacci ratio at 45.52. It may now continue to move mostly sideways in a large range. The alternate wave count below looks at the possibility that it may be very close to completion.
Primary wave 4 may not move into primary wave 1 price territory above 74.96.
At this stage, primary wave 4 has completed intermediate wave (A) only. Intermediate wave (B) is incomplete.
WEEKLY ELLIOTT WAVE COUNT
Click chart to enlarge.
The whole structure of primary wave 4 is seen here in more detail.
The first wave labelled intermediate wave (A) is seen as a double zigzag, which is classified as a three.
Intermediate wave (B) is also a three. This means primary wave 4 is most likely unfolding as a flat correction if my analysis of intermediate wave (A) is correct. Flats are very common structures.
Intermediate wave (B) began with a zigzag downwards. This indicates it too is unfolding most likely as a flat correction.
Within intermediate wave (B), the zigzag upwards for minor wave B is a 1.29 correction of minor wave A. This indicates intermediate wave (B) may be unfolding as an expanded flat, the most common type.
The normal range for intermediate wave (B) within a flat correction for primary wave 4 is from 1 to 1.38 the length of intermediate wave (A) giving a range from 26.06 to 16.33.
Primary wave 4 may not move into primary wave 1 price territory above 74.96.
Within the larger expanded flat correction of primary wave 4, intermediate wave (B) must retrace a minimum 0.9 length of intermediate wave (A) at 28.61 or below.
DAILY ELLIOTT WAVE COUNT
Click chart to enlarge.
Minor wave C downwards must subdivide as a five wave structure.
So far now there would be four overlapping first and second waves within this wave count. This indicates a possible strong increase in downwards momentum to come as the middle of a third wave passes.
When third waves extend, as this one is, they necessarily begin with a series of overlapping first and second waves. Third wave extensions are extended in both price and time, and they show lower degree corrections within them on higher time frames. This one so far looks like a normal start to a third wave.
Within micro wave 3, it is possible now that the middle may have passed. The degree of labelling for sub-micro waves (3) and (4) may also be moved down one, because the middle of the third wave may still be ahead. Within sub-micro wave (3), no second wave correction may move beyond its start above 48.42.
One or more of micro wave 5, subminuette wave v, minuette wave (v), and minute wave v should be expected to be a strong extension. This is typical of commodities.
The target for minuette wave (iii) remains the same.
ALTERNATE WEEKLY ELLIOTT WAVE COUNT
Click chart to enlarge.
What if primary wave 4 is closer to an end and remains within the maroon channel copied over from the monthly chart? What structure could it be?
Primary wave 4 will fit as an almost complete double combination: zigzag – X – triangle. This would see price remain within the maroon channel.
A combination would exhibit good alternation with the zigzag of primary wave 2. Primary wave 2 lasted 22 months. So far primary wave 4 would have lasted 15 months and be incomplete, so the proportion is acceptable.
This combination does not look normal though. Intermediate wave (X) is too shallow. Although intermediate wave (Y) would end close to the same level as intermediate wave (W), because of the shallow X wave the whole thing still has an upwards slope and is not overall a mostly sideways movement. However, it does fit and is technically possible. It will be considered as an alternate.
ALTERNATE DAILY ELLIOTT WAVE COUNT
Click chart to enlarge.
The triangle of intermediate wave (Y) is shown here in more detail.
Four of the five waves of a triangle must subdivide into zigzags, or zigzag multiples, and only one may be a multiple. So far minor wave A fits best as a double zigzag. All remaining triangle sub-waves must be simple threes.
Minor wave D looks like it needs a final fifth wave down to complete it. If intermediate wave (Y) is a contracting triangle, then minor wave D may not move beyond the end of minor wave B below 43.76. If intermediate wave (Y) is a barrier triangle, then minor wave D may end about the same level as minor wave B at 43.76. As long as the B-D trend line remains essentially flat the triangle will remain valid.
As soon as the B-D trend line has a downwards slope, then this triangle wave count may be discarded. That would offer strong confidence to the main wave count.
Minor wave E of both a contracting or barrier triangle may not move beyond the end of minor wave C above 52.00. Minor wave E would be very likely to fall short of the A-C trend line.
TECHNICAL ANALYSIS
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Volume rises as price falls. Now volume falls and is lighter as price rises. The volume profile is bearish.
The last green daily candlestick has a long upper wick and comes with much lighter volume. This looks like a small counter trend bounce that may be over here or very soon indeed.
It is difficult to draw trend lines along recent movement for On Balance Volume. The yellow support line is not perfectly showing where On Balance Volume bounced, but this is a weak bullish signal.
VOLATILITY INDEX
Click chart to enlarge. Chart courtesy of StockCharts.com.
Normally, volatility should decline as price rises and volatility should increase as price falls. Divergence from this normal can provide a bullish or bearish signal for Oil. However, it is noted that this signal occurs both in minor and major lows and it cannot be used to distinguish between them.
At the last low three days ago, there was single day divergence with price and OVX: price made a new low, but OVX did not make a new high. This has now been followed by two days of upwards movement, so it may now be resolved.
This analysis is published @ 12:27 a.m. EST.
very thankful for the update any new thought are always wanted
You’re most welcome 🙂
Now for the alternate price may be expected to turn up here or within the next day or so, for another deep bounce. If that happens we want to exit short positions, and for the more adventurous members maybe go long for a bit.
A new high above the last small swing high of the 12th of June at 46.72 should see shorts closed and either sitting on the sidelines or taking a punt on the long side.
Remember, always always use a stop. Trading without stops exposes the entire of your equity to risk. Management of risk is the single biggest aspect that distinguishes professional traders from amateurs.
If trading the long side, because it’s against the larger trend, my advice would be only invest 1-3% of equity on any one trade there.
After another nice strong downwards day, this is now where the main and alternate counts begin to diverge.
For the main count price should keep on going lower. If it can make a new low reasonably below 43.76 then we may have more confidence in the targets.
Pull stops down on short positions to protect some profit, to just above the last swing high of the 12th of June (check this price point on your brokers data, it may be slightly different to this FXCM data)