Downwards movement was expected for the week. An outside week closes red.
This week On Balance Volume gives a reasonable signal at the weekly chart level, and the short-term volume profile supports the main Elliott wave count.
Summary: A new mid-term target is now at 35.25 for a third wave down. This may exhibit an increase in momentum, and may end with a capitulation spike.
The final target is calculated at 10.72. Confidence in this target may be had if price makes a new low below 50.61.
The bullish alternate wave count would have confidence above 66.59. At that stage, a target for a third wave to end would be at 89.80.
MAIN 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 is still within a three steps back pattern, which began in July 2008. The Elliott wave count expects that the bear market for US Oil continues.
This Elliott wave corrective structure is a double zigzag, which is a fairly common structure. The correction is labelled Super Cycle wave (II).
The first zigzag in the double is complete and labelled cycle wave y. The double is joined by a three in the opposite direction labelled cycle wave x, which subdivides as a zigzag. The second zigzag in the double may now have begun, labelled cycle wave w.
The purpose of a second zigzag in a double zigzag is to deepen the correction when the first zigzag does not move price deep enough. To achieve this purpose cycle wave y may be expected to move reasonably below the end of cycle wave w at 26.06. The target calculated would see this expectation met.
Cycle wave y is expected to subdivide as a zigzag, which subdivides 5-3-5.
Cycle wave w lasted 7.6 years and cycle wave x lasted 2.7 years. Cycle wave y may be expected to last possibly about a Fibonacci 5 or 8 years.
If it continues higher, then primary wave B may not move beyond the start of primary wave A above 76.90.
WEEKLY CHART
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This weekly chart shows all of cycle waves x and y so far.
Cycle wave y is expected to subdivide as a zigzag. A zigzag subdivides 5-3-5. Primary wave A must subdivide as a five wave structure if this wave count is correct.
Primary wave A may be a complete five wave impulse at the last low.
Primary wave B may now be a complete single zigzag at the last high.
Primary wave C may have just begun. Primary wave C must subdivide as a five wave structure.
Primary wave A lasted 12 weeks, just one short of a Fibonacci 13.
Primary wave C may be longer in time as well as price. If cycle wave y lasts a Fibonacci 5 years, then primary wave C within it may take as long as a Fibonacci 233 weeks.
Intermediate wave (1) within primary wave C may be a complete impulse. Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 66.59.
Draw a channel about the zigzag of primary wave y using Elliott’s technique for a correction. Draw the first trend line from the start of primary wave A to the end of primary wave B, then place a parallel copy on the end of primary wave A. The upper edge of this channel may show where bounces along the way down find resistance. The lower edge of the channel may provide support.
DAILY CHART
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Note that monthly and weekly charts are on a semi-log scale, but this daily chart is on an arithmetic scale. This makes a slight difference to trend channels.
It is possible that intermediate wave (1) is complete. Minor wave 4 for this wave count exhibits some alternation to minor wave 2; minor wave 2 may be a relatively deep zigzag or flat, and minor wave 4 may be a more shallow zigzag.
Minor wave 5 ends with a slight 0.11 truncation.
Intermediate wave (2) may also now be complete as a zigzag.
Intermediate wave (3) may only subdivide as an impulse, and it must move below the end of intermediate wave (1). Within intermediate wave (3), minor wave 2 moved higher this week to complete a more obvious three wave structure. It is now more likely to be complete. Within minor wave 3, no second wave correction may move beyond the start of its first wave above 58.82.
The next downwards wave of minor wave 3 within intermediate wave (3) may be expected to exhibit an increase in momentum and an increase in ATR. It may have support from volume pushing price lower.
ALTERNATE ELLIOTT WAVE COUNT
MONTHLY CHART
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It is possible that the bear market is over for Oil and a new bull market has begun.
For a bullish wave count for Oil, the upwards wave from the major low at 26.06 in February 2016 must be seen as a complete five wave impulse. This is labelled cycle wave I.
Cycle wave II may be a complete zigzag at 0.679 the depth of cycle wave I.
A target is calculated for cycle wave III to reach a common Fibonacci ratio to cycle wave I.
Within cycle wave III, no second wave correction may move beyond the start of its first wave below 42.37.
WEEKLY CHART
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This weekly chart shows detail of cycle wave I as a five wave impulse.
Cycle wave II does look best as a three. This is the only part of this wave count that has a better look than the main wave count, which sees this downwards wave as a five.
Cycle wave III may only subdivide as an impulse. Within cycle wave III, so far primary waves 1 and 2 may be complete.
Draw a base channel about primary waves 1 and 2. Draw the first trend line from the start of primary wave 1 to the end of primary wave 2, then place a parallel copy on the end of primary wave 1. The lower edge of this base channel has so far provided support for lower degree second wave corrections along the way up.
DAILY CHART
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Primary wave 3 may only subdivide as an impulse. Within the impulse, intermediate wave (1) may be complete.
Intermediate wave (2) may now be a complete zigzag, which perfectly found support at the lower edge of the base channel copied over from the weekly chart.
If it continues any lower as a double zigzag, then intermediate wave (2) may not move beyond the start of intermediate wave (1) below 50.61.
This wave count would reduce in probability if the lower edge of the base channel is breached by downward movement.
TECHNICAL ANALYSIS
MONTHLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
May has closed with a strong Bearish Engulfing candlestick pattern, which has strong support from volume. This supports the main Elliott wave count.
June moved price lower with a lower low and a lower high, but the candlestick closed green and the balance of volume was upwards. Upwards movement within the month did not have support from volume. This also supports the main Elliott wave count.
There is now double bullish divergence between price and On Balance Volume. This supports the alternate Elliott wave count.
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
This week completes an outside week, which has closed red with the balance of volume downwards. Volume within the week has actively pushed price lower. This supports the main Elliott wave count.
The bearish signal this week from On Balance Volume is reasonable: the trend line is not too brief and has been tested three times prior to this week’s breach. This supports the main Elliott wave count.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The strongest volume, since the 20th of June, has occurred on downwards days. This supports the main Elliott wave count. Volume is actively pushing price lower. Downwards days also have stronger ATR.
Published @ 09:56 p.m. EST.
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New updates to this analysis are in bold.