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Crude Oil according to plan

On April 8th we published an analysis on crude oil, in which we were expecting a decline soon. We were preparing for a sell-off, because we had a classical 5-3 Elliott Wave pattern. On the chart below you can see how crude oil looked like, when we made this forecast.

crude oil 8.4.14

The next chart will show you how the situation has been developing during the last month.

oil 4h

As shown, crude oil went a bit higher, but was unable to reach the point of invalidation at 105.20, so with protective stops at the right place we had to stick to our bearish plan. And just when we were starting to doubt ourselves, the market decided to begin the decline we were waiting for, falling from 104.08 to 98.72 dollar per barrel. Now is the time to go deeper into the wave structure, in order to gain more confidence in our count. The price action in the white rectangle is depicted on the next chart.

oil 1h

And the 1-hour chart shows exactly what we were hoping for – a five-wave impulse to the south. According to the Elliott Wave Principle, impulses show the direction of the larger trend. So when we have one impulse on the 4-hour chart and another one on the 1-hour time-frame, both pointing down, we have no reason to be bulls on crude oil. However, after every five waves, a correction follows. The correction on the 1-hour chart is already under construction. A good place for its end may occur in the 102.20 area, because there is the terminus of wave 4 (orange) of the previous impulse + the key 61.8 Fibonacci level. Once this level is reached, we will be expecting more weakness from crude oil, which could lead prices beneath 97.30 and if we consider our big picture scenario – much lower.

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