If you were bullish on the price of crude oil, last week was nothing short of wonderful for you. The commodity opened the weekly trading session at $47.57 and after a small dip to the round number of $47, it climbed to as high as $50.47 a barrel, exceeding the previous major high of $50.40, registered August 1st. This on the back of a persisting supply glut and the aftermath of two category 4 hurricanes.
But this sharp advance was preceded by a similarly fast selloff from $49.09 to $47.28 on Friday, September 8th. A plunge that could easily convince even the most stubborn bull it was time to give up and join the bear side. Fortunately, the Elliott Wave Principle was there to help us keep a cool head. Before the market opened on Monday, September 11th, we sent the following chart to subscribers.(some marks have been removed for this article)
As visible, despite the recent pullback, we maintained our bullish outlook on crude oil prices. The entire price action from the very bottom at $42.03 was pointing north and there was no reason to turn bearish, just because of one bad day. In addition, the chart above allowed us to recognize a specific invalidation level at $45.57. As long as it was intact, the bulls were likely to pursue their ambition to finally take out $50.40. A week later, here is what happened to crude oil.
The price did not go straight up from the start, but what counts is that $45.57 was never threatened. Instead, the bulls were finally rewarded for their patience, or should we say stubbornness, after $50.47 was reached just four days later, on September 14th. Oil even creates the impression the world’s efforts to re-balance the market are going to be successful. But are they?