Oil - A SLIPPERY CUSTOMER STILL IN BEARISH CYCLE by DanV on TradingView.com
10 March 2015
There is much speculation about where oil is headed with some suggestion drop to $20 or lower. Ignoring the Intra-Day charts, variety of charts has already been published here on TV with bullish targets 60 - 75 and downside target from 30 - 20. One of the charts suggests that from 2008 high we could have AB=CD move, if the author is suggesting 100% relationship that would have the oil price sub $0 which is not realistic. I have been sharing my view in Forex chat with others as well as at my chatroom. However, so many are asking me about my view on oil, therefore, I feel it is time to publish a chart.
NOTE: whilst many are looking for relatively short term view over next few days to weeks, I feel it is not possible to put price action over such period in to context of overall larger degree cycle.
Whilst publishing a daily chart to meet the need of most traders here, I will emphasise larger degree cycle which is near impossible to anticipate and could prove completely wrong, nevertheless, it is still necessary to consider and see how future price either confirms or proves it wrong. My attempt to extrapolate such anticipation of price action over longer term is purely based on my interpretation of Elliott Waves with full understanding that this will not be for all and many would dispute the validity. Hopefully those who do feel they have alternative views and reasoning, then they will be gracious enough to share their charts with details rather than just being rude and abusive.
BACK GROUND: (Please see Monthly & Weekly Charts in updates and comments)
Since July 2008, all time high Oil has entered a larger degree bearish cycle with the initial impulsive 5 wave decline to form Feb 2009 low. Based on Elliott Wave Principle, we would have expected an "abc zigzag" up as retracement before next leg down. However we have a zizgag but not an "abc", rather it is wxy resulting in retracement high in April 2011. Since then we appear to have another "wxy" and are progressing in larger wave C of Y.
If this interpretation is correct then we either have flat correction suggesting that once completed, we could have strong 5 wave impulsive move that could retest April 2011 High or continue to get wxy zigzag and form what is called 3-3-3-3-3 contracting triangle. With OPEC producers unwilling to make drastic cut to future oil production, I feel that we are more likely to develop a triangle over several years. Similarly 2008 high was in my view either a wave 3 high or more likely a wave 5 high of a much larger degree that lasted several decades, hence the overall correction with final low to form correspondingly over a much larger time period. Historically oil has declined several times in the magnitude of 78% - 80% retracement of its bullish move, therefore it will be nothing new on this occasion, if it does again.
Turning To Current Price Action:
That said the recent decline I feel started in Aug 2013 high was wave "b", and are progressing in wave "c", which should have an impulsive 5 waves decline and could be in final stage of wave 3, namely minor wave "v" of 3. If correct we should see potential intermediate bottom around 40 as round number to complete wave 3. Hence there will be several opportunities to trade both bullish and bearish swings as we see this progresses complete.
Summary - Short Term:
1. After the recent low we have retraced wave "iv" of 3 which appears to be completed.
2. Could be in early stage of wave "v" or 3. A drop below 48 will confirm.
3. However, it is in a shorting zone with potential minor wave i of "v" of 3 is in progress.
4. If correct, stop could be above 52.50
5. downside target for completion of wave 3 is around 40, which might form possible RSI divergence on Daily chart.
6. Also this zone has several Fibs confluence and previous structure resistance that could now be support.
Completion of wave 3 in around 40, will offer long trade back towards 60 - 65 in wave 4 of this bearish cycle. The larger picture noted above might be rather difficult to grasp for many, hence, I will post a short video explaining this shortly. Stay tuned and check back later.
As always, do your own analysis for your trade requirement. Select to follow me and the chart for notification of future updates. If you like the analysis then please indicate this by thumbs up, constructive comments and sharing with others. If you have an alternative idea then please share for all to learn from.
Thank you for taking the time to read my analysis.
DanV