Crude oil rose from 38.50 to 50.03, before falling to 43.85 again. The black gold has been consolidating ever since, which makes us wonder when the consolidation is going to end. Let’s hear what the Elliott Wave Principle has to say about it.
On the hourly chart of crude oil we could see that the advance to the 50-dollar mark could be counted as a five-wave impulse. According to the theory, every impulse is followed by a three-wave correction in the opposite direction. This means that all the price action, following the top at 50.03, has to be corrective. In fact, it looks like an A-B-C zig-zag, where wave B is a triangle and wave C is still missing. That is why we believe, that once wave B is over, crude oil is likely to decline again. The likely downside target is the 61.8% Fibonacci level near 42.90. This is also the area, where we will be expecting a bullish reversal, since the whole 5-3 wave pattern points north for crude oil prices.
