WTI crude oil set an upbeat mood at the start of last week and managed to lift the price to $69.89 on Monday, August 6th. They could not keep the positive momentum for very long though, as the price quickly reversed to the south again. By Friday, August 10th, the bears had already dragged WTI crude oil prices to an intraday low of $66.12 a barrel.
The ongoing trade war between the United States and China, and the less-than-expected decline in crude oil inventories reported by the EIA have probably contributed to WTI’s price drop, but as it usually happens with news and events, the degree of their impact remains a mystery. Elliott Wave traders, on the other hand, did not even have to pay attention to such external factors. All they had to do was look at the hourly chart of WTI crude oil, which we sent to subscribers a few hours before the market opened on Monday, August 6th.
According to the bigger picture outlook, which was also included in the analysis, the Wave principle suggested the bears were not done with WTI crude oil yet. It looked a w)-x)-y) double zigzag correction has been in progress since the end of the truncated wave 5 at $74.67. This meant that as long as the price stayed below the end of wave x) at $70.41, a new low in wave “c” of y) should be expected. But first, wave “b” up had to complete its three-wave structure. A week later, this is what WTI crude oil’s hourly chart looks like now:
Wave “b” rose to $69.89, but it did not endanger $70.41, so the negative outlook was still intact. Crude oil spent the rest of the week declining until it fell to a new low of $66.12 on Friday.
The U.S. and China have been imposing tariffs for months now and crude oil was not declining all the time – there have been recoveries, as well. Why use the trade war to explain this particular slump then? Such after-the-fact explanations for price swings is what leads people to the false conclusion that the markets are random and chaotic. The truth is that without the Elliott Wave principle, we would think so, too.
What will WTI crude oil bring next week? That is the subject of discussion in our next premium analysis due out later TODAY!