Trade war fears are officially back, causing indiscriminate selling of stocks and commodities alike. Crude oil has been hit especially hard as supply glut worries are also beginning to reemerge.
Crude oil closed at $53.34 a barrel last week, but this selloff was triggered by the breach of a key level in the week before that. The drop from $66.58 looked like nothing more than a regular pullback. However, the alternative count below, sent to subscribers on May 20th, revealed a much more bearish possibility as well as the key level whose breach would trigger it.
While the decline from $66.58 to $60.02 could be seen as a three-wave sequence, implying the uptrend is still in progress, it could also be a bearish leading diagonal pattern. Being objective meant we had to keep both possibilities in mind.
Nevertheless, every alternative count needs a specific level to activate it. In the crude oil’s case, that key level was the bottom of wave B at $60.63. As long as the price stayed above it, there was still hope for the bulls. But if $60.63 gave up, it would mean much lower levels can be expected. Then this happened:
The upper line of the corrective channel discouraged the bulls and caused a bearish reversal from $63.79. On May 23rd, the price of crude oil fell below $60.63. This told us that the bulls have officially been defeated and that it was time to join the bear camp. A week later, crude oil closed at $53.34 a barrel.
Trade wars, supply imbalances, sanctions, embargoes. The news will never stop pouring and finding your way in the labyrinth they form will always remain next to impossible. Technical analysis, on the other hand, offers a much simpler way of dealing with market uncertainty. Sometimes a bullish and a bearish outlook accompanied by a key level to divide them is all a trader needs.
What will WTI Crude Oil bring next week? That is the subject of discussion in our next premium analysis due out late Sunday!