As WTI crude oil approaches the $60 mark, we could conclude that it was not a smooth ride at all. The price has been wandering between $55 and $59 for nearly two months until it finally broke out of this range to reach levels not seen since late-June, 2015.
A month ago the price surpassed $59 a barrel and the bullish bets were mounting. But instead of continuing to the north, crude oil made a bearish reversal for the start of a plunge to as low as $55.80 by December 7th. And then again, just as some bulls were getting ready to trow in the towel, the uptrend resumed. Here is how the Elliott Wave analysis sent to clients before the open on Monday, November 27th, helped us stay ahead of the crude oil market.(some marks have been removed for this article)
As visible, while the price was hovering near the $59 mark a month ago, the Wave principle suggested that instead of joining the bulls, we should get ready for a noteworthy pullback in wave 4, because wave 3 had already drawn a complete five-wave impulse. Keeping in mind that trends have a habit to develop within the parallel lines of a channel, we thought we should “not be surprised if a decline to $56.50 occurs, before the uptrend resumes in wave 5“. A month later, the updated price chart of crude oil below shows how this played out.
Wave 4 turned out to be a little deeper than initially anticipated. It developed as a triangle correction, whose wave “a” caused the above-mentioned dip to $55.80. Nevertheless, the lower line of the trend channel held the bears’ ambitions. It then took ten more days for waves “b”, “c”, “d” and “e” to complete the entire wave 4 and open the door to a new two-and-a-half-year high. And while shorting in order to catch wave 4 was not recommended, buying the dip and ride wave 5 made sense. A month of patience and discipline was all it took.