The price of crude oil initially rose to $44.68 on Monday, but then the bears took over again, which led to a decline to $43.05. But instead of continuing to the south, oil rebounded sharply up and is currently trading above the $46 mark. You might even think that the price is deliberately moving up and down and up again just to enrage you and take your money away. Relax, it is nothing personal. In fact, with the proper analysis, anyone could have taken advantage of oil’s behavior, just like our premium clients did. They received the following chart on Monday, September 19th, before the markets opened.(some marks have been removed for this article)
As visible, we assumed that a five-wave impulse to the downside has been in progress since the top of wave “c”. The problem was that its fourth and fifth waves were still missing, so we were expecting a small recovery in wave 4, followed by another decline in wave 5. Next, once the impulsive decline was over, a significant recovery was supposed to begin. Believe it or not, Elliott Wave analysts can extract all that information from a chart. Nothing else was needed to make that forecast. Today is Thursday, so let’s see how the price of crude oil has been developing during the last four days.
Fourth waves usually terminate within the area of previous fourth waves. So, it is not surprising that wave 4 ended at $44.68, slightly below the highest point of wave iv of 3. Then crude oil plunged to a new low in wave 5, but since every impulse is followed by a move in the opposite direction, instead of selling the bearish breakout, traders should have been preparing for a rally in crude oil. As you can see, the Wave principle can not only help you predict a reversal, but to anticipate a series of consecutive price moves in both directions. We cannot think of another method capable of doing that. Could you?
What to expect from now on? What is the bigger picture saying? Is crude oil going to continue even higher or the resistance near 46.00 would turn out to be too strong for the bulls to breach? Prepare yourself for whatever is coming. Order your Elliott Wave analysis due out on Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.