In our previous article you saw that a bearish reversal in the price trend of crude oil could be predicted, even when OPEC extends its production cuts agreement, which should normally be a bullish factor. It has been roughly 20 days since that post and oil’s plunge shows no signs of stopping. After falling to as low as $44.21 yesterday, the commodity is currently trading close to $44.70. In this article you will see how the Elliott Wave Principle provided us with a simple “sell and hold” strategy to follow.
Before the market opened on Monday, May 29th, the following chart of crude oil was included in the weekly analysis and sent to our subscribers.(some marks have been removed for this article)
As visible, since we thought oil has changed direction, it made sense to use the top at $51.97 as an invalidation level for this count. As long as this level was intact, more weakness should have been expected. A week later, before the open on Monday, June 5th, the chart of WTI crude oil looked like this:
$51.97 was never tested. Instead, the bears applied enough pressure to force the oil’s price to continue declining. On June 12th, we could move the stop-loss level by nearly $3 a barrel down to $49.15, thus locking in some profit and still be in the trade. By the time we had to send the next issue, crude oil bears had managed to conquer new territories.
On Friday, June 9th, the market closed at $45.87. Before the open on June 12th, our new invalidation level was $48.37, while keeping the negative outlook on oil’s short-term prospects. Today is June 16th and the updated chart below shows the sell and hold strategy was a good choice.
$48.37 was never in danger and crude oil prices are now approaching the May lows near $44 a barrel. Riding the selloff would have been impossible without the Elliott Wave analysis, of course, since it provided the necessary trust in the bears’ abilities to keep the downtrend in progress.