US OIL: Elliott Wave and Technical Analysis | Charts – February 7, 2020
The target for downwards movement to end was at 48.81. Price continued lower this week to reach 49.32, just 0.51 short of the target.
Summary: Both the bullish and bearish Elliott wave counts now expect upwards movement. The target for the main bearish count is at 65.83.
MAIN ELLIOTT WAVE COUNT – BEARISH
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 w. 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 y.
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. When primary wave B may be complete then the start of primary wave C may be known and a target may be calculated.
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.
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 wave 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 be a double combination: zigzag – X – flat. Intermediate wave (W) fits as a zigzag. Intermediate wave (Y) may be unfolding as a flat correction.
Within intermediate wave (Y), minor wave A may be complete. Minor wave B may be a complete expanded flat. Minor wave C may now move upwards to complete the flat correction of intermediate wave (Y).
When primary wave B may be complete, then a downwards breakout would be expected for primary wave C.
Primary wave B may not move beyond the start of primary wave A above 76.90.
DAILY CHART
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This daily chart shows all of intermediate waves (X) and (Y).
Intermediate wave (Y) may be subdividing as a flat correction. Within the flat, minor waves A and B both subdivide as threes. Minor wave B at 1.13 the length of minor wave A is within the most common range of 1 to 1.38. The target calculated for minor wave C expects it to exhibit the most common Fibonacci ratio to minor wave A.
A new high above 54.38 could not be a second wave correction within minuette wave (v) within minute wave c, so at that stage minute wave c and minor wave B would most likely be complete. While price has not yet passed the confidence point, an invalidation point will not be set. Minor wave B may still continue a little 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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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.
The upwards wave of primary wave 1 within cycle wave III must be seen as a five wave structure for a bullish wave count to work. This movement at lower time frames does not subdivide well as a five; this reduces the probability of this wave count.
Cycle wave III may only subdivide as an impulse. Within cycle wave III, so far primary waves 1 and 2 may be complete. If it continues any lower, then primary wave 2 may not move beyond the start of primary wave 1 below 42.37.
A target calculated for primary wave 3 expects it to exhibit a common Fibonacci ratio to primary wave 1.
DAILY CHART
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Primary wave 2 may now be a complete double combination.
The first structure in the double is a zigzag labelled intermediate wave (W). The double is joined by a three in the opposite direction labelled intermediate wave (X), which subdivides as a zigzag. The second structure in the double may now be a complete expanded flat labelled intermediate wave (Y).
The confidence point is the same for the same reason. The invalidation point must remain the same while price has not passed this point. If it continues lower, then primary wave 2 may not move beyond the start of primary wave 1 below 42.37.
TECHNICAL ANALYSIS
MONTHLY CHART
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There is now double bullish divergence between price and On Balance Volume. This supports the alternate Elliott wave count.
Overall, price has been moving sideways for a few months now. Within this sideways movement, the downwards month of May has greatest range and volume; this supports the main Elliott wave count. Upwards movement for December lacks support from volume. Now downwards movement for January exhibits increased range and support from volume. The volume profile remains bearish; this supports the main Elliott wave count.
WEEKLY CHART
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Price is consolidating, swinging from support to resistance and back again. Support is about 51 and resistance is about 66. A downwards swing may now be over; price is at support and Stochastics is entering oversold. There is little room for downwards movement to continue. Another close below support at 50 on a downwards day may indicate a downwards breakout. Support from volume would add confidence. While this has not yet happened with conviction, expect an upwards swing to begin about here.
When price consolidates, each swing is normally very choppy and overlapping. Do not expect price to move in a straight line.
DAILY CHART
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The weekly time frame is best to view the larger consolidation. This daily time frame focusses more on each swing within the larger consolidation.
At this time frame, the downwards swing is a downwards trend. The trend is now extreme. Stochastics is oversold and has been so for some time, and now there is a candlestick reversal pattern that has support from volume. The downwards swing may be over here.
On the 4th of February price closed below support, but this was quickly reversed the following session. This potential downwards breakout is unconvincing and now looks like a small overshoot of support.
Published @ 04:15 a.m. EST on February 8, 2020.
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