Between January 25th and February 9th, WTI crude oil’s price plunged from $66.62 to $58.06 a barrel, losing 12.8% in just 12 trading days. What the bears did in just over two weeks, the bulls needed a month and a half to recover from. Finally, oil prices climbed to $66.52 earlier today, following last week’s sharp rally from $62.20 to $65.96. The chart below, sent to clients over a week ago, on Wednesday, March 14th, shows how we got here.(some marks have been removed for this article)
While WTI was hovering around $61.00, the 4-hour chart allowed us to see that the price swings from the low at $58.06 look very similar to a leading diagonal pattern, labeled i-ii-iii-iv-v, followed by a three-wave a-b-c correction. Since diagonals serve as a substitute for impulsive waves, the Elliott Wave Principle suggested the trend was supposed to continue in the direction of the five-wave sequence. As long as WTI crude oil prices were above $58.06, the positive outlook was going to remain valid. The updated chart below illustrates how the situation developed.
It turned out the bulls were ready to take over almost right away. The invalidation level at $58.06 was safe the whole time and all traders had to do was sit on their hands and stick to the analysis. Now with the resistance of $66.50 in the bulls’ way, it remains to be seen how the price would react to this obstacle. Elliott Wave analysis, of course, is already giving us a hint.
