The chart above depicts a longer term Elliot Wave count. Since 1998, oil has enjoyed a 5-wave bull run culminating in July 2008. Recent price action has since corrected 64% of this up move in just a few months, without a major countertrend rally. It is due for a bounce, the only question is when.
The bear trend is definately reaching exhaustion, as MACD is diverging with price and volume has been downtrending. I think $42.50 should prove to be strong support for a two reasons: first, it was the Wave4 low back in 2007, and second, Wave-c = Wave-a @ $42.34. Add to that the fact that commercial traders are more net long than anytime since the January 2007 low, and you have a recipe for a nice bull move.
2 comments:
great analysis! I will add this one to my watch list.
One other point that supports your expectation of a low and change of trend soon: Looks to me like USO is in the 5th wave of a small Ending Diagonal that began on Nov. 4, wave 1 bottomed on Nov. 6, wave 2 topped on Nov. 10, etc. The lower trendline crosses 42.50 tomorrow.
Yeah I noticed that pattern too. I think the likely range for the low is $40-45.
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