WTI Crude Oil

Short-Term Oil Elliott Wave Analysis

Published 8th August 2018

Crude spiked, as expected, into a slightly lower low before rebounding last week. We remain with our short-term bullish outlook. We expect to see crude continue to the upside along the black path in our very first chart below. The rebound that we recorded from last week’s low does not count as a motive wave yet! However, we expect to see crude’s wave action morph into either an impulse or a leading diagonal.

We will be alert if the pale green trend channel gets challenged to the downside. As already mentioned during the past weeks: this kind of wave action has potentially strong downside implications within the current setup. A penetration of the pale green channel does not automatically trigger a big selloff. A waterfall drop would be the second most likely case if we get there during the next few days. The most likely case would then be an unfinished expanding ending diagonal. This essentially means that the July high was merely minute wave a(circle) of 5.

It makes often sense to keep things as much as possible simple. This boils here down to the fact that the green trend channel is intact. There is just not enough contradicting evidence and we go with the paramount trend in any case of doubt. The bottom line is that we expect to see another 52 weeks high just ahead of us in crude.

Published 25th July 2018 & amended August 1st 2018 (chart and 1st paragraph)

The crude Elliott wave structure did not develop a clear impulsive pattern from the July 2018 low to the upside. It is chubby and overlapping. Moreover, it does not fit to the character of the swing down during the first couple of July weeks. It rather looks like a B-wave correction than the fourth wave of that swing. Another spike towards support around 66.6 appears likely. Sentiment readings continue to show elevated readings. Market participants are excited about crude and expect it to rally. That’s in contrast to what we have observed historically. Market rallies occurred unexpectedly most often. Therefore, we assess the upside potential in crude as limited despite another likely spike higher.

We remain with our conclusion that crude develops along the pale green trend channel to the upside. Our interpretation gets challenged significantly if the green channel support gets penetrated. That kind of action raises odds for a cycle high in early July 2018. Moreover, a drop below the pale green trend channel could do some serious damage on the downside. The setup has the potential for a big drop. It is important that we distinguish here between the potential for a big drop and a likely scenario. A waterfall drop is not the most likely path even if the green trend channel gets penetrated. However, it may happen and it is good to be aware of it before prices potentially get there.

All in all, there are pros and cons regarding the current situation in crude: The wave structure does not reveal a clear picture, which is clearly a con. However, an attractive risk-reward setup may be right in front of us here, which is clearly a pro. The distance to the green channel support on the downside is much smaller than the target of another potential (and likely) spike to the upside. 

Mid-Term Oil Elliott Wave Analysis

Published 4th July 2018

It is too early to tell but crude may hit a cyclical high rather sooner than later. The oil complex may have risen too fast and lost its strength consequently. The green trend is not as sharp and steep as the blue trend. Both are separated by a very shallow correction. The correction occurred in early 2018 and we label it as wave (B). To subsequent rise (Feb 2018-May 2018) looks and counts slightly better as a 3-wave advance. That could be the initial setup of two similar patterns. It is either a leading diagonal, which resolves as the black scenario or the beginning of an ending diagonal as depicted by the red scenario.

We will probably get further hints regarding this after the next correction (3-wave pullback). We expect a shallower correction within the black scenario. Most important, the black scenario counts as a 3rd of 3rd after the next down sequence. A very strong push to the upside results most often during that stage. The green trend channel should get broken to the upside if the black scenario plays out. On the contrary, the green trend channel will act as resistance if the red scenario plays out. This 3-wave upside action fading near trend resistance will be a strong indication that we are dealing here with an ending diagonal.

It is too early to fully embark on either scenario right now. The key takeaway is that the next pullback most likely results in a good bullish entry opportunity. Complacency among market participants rather supports the red case as we publish this. Sentiment gauges point to bullish expectations and positions among market participants. It would be slightly surprising if those conditions cool off significantly after the next correction.

Long-Term Oil Elliott Wave Analysis

Published 15th November 2017 

Price action has been exciting over the past couple of decades. WTI increased 15-fold from its levels in the late 90’s and had two magnificent crashes thereafter. We see crude oil to behave further in a complex manner. Mid-term, our Elliott wave analysis projects significant upside from the 2016 lows.

Long-term, there may be another few decades with crude oil in a trading range between $25 and $150. The sideways pattern makes also a fundamental sense in a time when electric cars are waiting for their breakthrough and gas or alternative fuels compete with crude oil as an energy source.

Technical Analysis