Last time we showed you how Elliott Wave analysis warned us in advance about the crude oil price crash, which took place between mid-October and mid-November. Today, we’re going to examine what has been going on after that. Long story short, the price of WTI crude oil continued to move according to plan during the following two and a half months.
The first of the charts shown below was part of our Pro analysis, published on November 20th, 2023. Since the decline from $95 a barrel was clearly a three-wave structure at the time, we took two possible alternatives into account. The primary one, supported by our big picture outlook, implied that this decline was going to evolve into a five-wave impulse. In order for this scenario to remain valid, waves 1 and 4 were not supposed to overlap. This allowed us to identify the bottom of wave 1 at $81.47 as the invalidation level for this count. A surge above it would force us to switch to the bullish alternative.
We didn’t have to worry about that yet, though, because fourth waves usually end near the 38.2% Fibonacci level. The second chart shows that this is exactly what happened. The best the bulls could achieve was a three-wave recovery in wave 4 to $79.56 on the last day of November. The bears took the wheel again from there and $81.47 remained intact. By the time we published our December 4th update, wave 5 was already in progress.
The fifth wave was supposed to fall to a new low. On the other hand, the Elliott Wave theory states that a three-wave correction follows every impulse. The exact bottom was impossible to pinpoint, but joining the bears below the $70 mark sounded like a bad idea. Instead, we thought a notable recovery to the resistance of wave 4 near $80 was likely to begin soon.
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Our December 18th analysis revealed that wave 5 was most likely over already at $67.68. With the price of crude oil back above $70 a barrel, the idea of joining the bulls had started to make sense. It wasn’t a smooth ride, though. Not only did wave ‘a’ develop as an expanding leading diagonal, but the market decided to draw a triangle correction in wave ‘b’. As long as $67.68 was intact, however, the positive outlook was going to remain valid. Earlier today, WTI crude oil climbed to $79.25 and the resistance of wave 4 has now officially been reached.
When asked, most people, experts even, would say that it is news and events, which cause market prices to move up or down. There’s been no shortage of news from the Middle East in recent months. Not only is Israel still at war with Hamas, but the Houthis’ attacks on trade ships in the Red Sea prompted a military response from the West. The entire region, vital to global oil supplies, has become a boiling cauldron threatening not only the global economy, but world peace, as well. Yet, Elliott Wave analysis somehow foresaw the way in which the market was going to absorb all that, and put us ahead of it. Furthermore, it is already giving hints of what’s likely to follow.
In our Elliott Wave PRO subscriptions we provide analyses of Crude Oil, Gold, Bitcoin, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!