It was a roller-coaster week for crude oil prices. The market moved sharply up on Monday, September 5th, climbing to 46.51 during the European session. Then is suddenly fell back to 43.82. And just when it looked like the downtrend has resumed, the bulls returned to take oil to 47.72 on Thursday, September 8th. These violent developments made it necessary for us to send an intraday update to our crude oil premium clients on Tuesday, September 6th. Here is the chart they received that day.
Elliott Wave analysis works best, wen there is a clear pattern. The chart above shows that the rally from 42.98 to 46.51 is a clear five-wave impulse with an extended fifth wave. In this respect, the weakness to 43.82 was the natural three-wave retracement, which follows every impulse. According to the theory, as long as the invalidation level at 42.98 was intact, crude oil prices could have been expected to start recovering and eventually climb above the top of wave 5 of the impulsive sequence at 46.51. Today is Friday and the week is almost over. Let’s see if the above-shown forecast has done any good.
Fifth waves are usually fully retraced. This means we could have predicted that the a-b-c correction is going to be a little deeper. Our mistake. However, the critical level at 42.98 was never threatened and despite the bears’ persistence, the positive outlook remained valid. Just two days later, crude oil was already hovering around 47.70, thus once again proving the Wave Principle’s value to traders. Besides its predictive abilities, it also provides specific price levels to serve you as a map and tell you if you are on the wrong track. Just as you should not go on a road trip without a GPS, you should not enter a trade without a map of key price levels. Or you risk getting lost somewhere in the market swings.