Ahead of the 14% Crude Oil Dive with Elliott Wave

Elliott Wave reversal ahead for crude oil prices

[personalization-condition 11664]

The crude oil market is capable of going from a state of oversupply to one of not enough supply in relatively short time. OPEC and Russia’s decisions and the fact that in a normal year the world consumes over 100 million barrels of oil daily cause the pendulum to swing from glut to deficit quite quickly.

At the start of this month OPEC announced it is going to keep production steady through April. The vaccines rollout and ongoing economic recovery, in the meantime, come with gradually increasing oil consumption. And while it is probably too early to talk about a supply deficit, it is also true that WTI prices went from -$38 to almost $68 a barrel in less than a year.

Why then did the price of crude oil suddenly drop 14% over the past two weeks? From a fundamental macro perspective, the exact reason remains hard to pinpoint. From an Elliott Wave point of view, though, that plunge was not only logical but also predictable.

Crude Oil poised for a bearish Elliott Wave reversal

The chart above was sent to our subscribers before the market opened on Monday, March 8th. It focused on the fact that the structure of the rally from $33.78 was impulsive. The pattern was labeled 1-2-3-4-5, where the sub-waves of 1 and 3 were also visible.

Crude Oil Bears Return with a Bang

According to the Elliott Wave theory, a three-wave correction follows every impulse. So, instead of blindly extrapolating the recent strength into the future, we thought it was time for a notable bearish reversal. Corrections usually erase the entire fifth wave of the preceding impulse. Here, this meant a dip at least to the support area of wave 4 could be expected. The chart below shows WTI’s development over the following two weeks.

Crude oil drops 14% in two weeks in Elliott Wave correction

Crude oil opened with the so-called exhaustion gap and reached as high as $67.80 the same day. From then on, however, the bears took complete control of the situation. Ten days, later, on March 18th, the price was already down 14% to $58.27. As expected, the entire progress made by wave 5 has been erased.

We have no idea how the pandemic is going to unfold nor what OPEC+ is planning. What we do know is that in the search for future guidance it pays to look for Elliott Wave patterns.

[personalization-condition 11664]

New to Elliott Wave?

Elliott Wave principle offers a completely new understanding of what the nature of the markets is, what drives them and what can be derived from their movement. This course is for those of you, who have been looking for an honest Elliott Wave guide, describing the method’s advantages over other trading tools, but not hiding its weaknesses.

Check Video Course    or     Check our eBook


See our Video Course
or check our eBook

Last year over 60k readers trusted EWM Interactive to help them in their trading decisions.

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- Xavier N.

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- J. Kotzee

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- C. Montgomery

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- C. Montgomery