Almost two months ago, on February 21st, we said that brent oil is likely to get more expensive, but needs a downside correction first. We thought so, because there was a nicely-looking five-wave impulse to the upside on the 4-hour chart. The Elliott Wave Principle postulates, that there should be a three-wave retracement after every impulse. That is only the reason why our forecast looked like this:
As visible, we assumed brent was in wave B of an A-B-C zig-zag correction. So, wave C to the south was needed before the bulls could return. As the next chart demonstrates, the price of brent oil developed as a textbook example of the basic 5-3 wave cycle.
Wave C led prices as low as $52.50, which is precisely where the 61.8% Fibonacci level lies. Then the bulls came back and took the wheel. Yesterday, brent oil almost reached the $65 mark, thus making a new top, above the one left by wave 5 at $63. In terms of the Wave Principle, this is the minimum requirement for a successful forecast. However, if we stick to the big picture outlook, we will see there is room for much higher levels.
