16 October WTI Elliott wave analysis

The Oil market bounces on Friday just few hours after the London open. Will the recovery be strong enough to yield a bullish breakout from the strong resistance zone or the bears will kick back at $42? The following 16 October WTI Elliott wave analysis shares some insights.

October 16, 2020 / AtoZ Markets – WTI has maintained a bullish correction that started on 8 September at $36. The corrective nature, therefore, suggests the resumption of the medium-term bearish trend below $30. However, a surge to retest the $42 roof is very much likely before the next oil price collapse. If Covid-19 second wave leads to the second global restrictions, demand for the commodity would dwindle and its price fall sharply.

The global markets have been driven by a general risk aversion this week. This came after a very buoyant run in the previous week. US stock is down by 3% this week while risk FX also took a large share of the bitter cake. The oil market, often driven by general market risk sentiment, is not left out of the huge volatility. However, the black gold responded in a mixed manner.

After starting the week around $40.4, WTI collapsed to $39 before the end of Monday. Surprisingly, it followed up with a massive 5.7% resurgence till Wednesday before the week’s sharpest decline to $39.2. The whipsaw continued with a sharp bounce to $41 on Friday. The commodity dropped mildly, during Asian session, to the week’s opening price around $40.4. After dropping further to $40.27, WTI has now bounced to $40.55.  The price is down in another corrective structure. Perhaps, a surge to the $42 top will come according to the 16 October WTI Elliott wave analysis shown below.

16 October WTI Elliott wave analysis

wti crude elliott wave analysis

In the last update, we used the chart below to study the long term wave structure of the commodity. We expected an A-B-C bearish correction with wave C having the potential to hit $27 or even $22. However, wave B seems not to have ended. Until then, price would spend more time at the roof of the corrective channel.

16 October WTI Elliott wave analysis

Charts from TradingView

The 16 October WTI Elliott wave analysis above shows wave B developing into a double zigzag corrective pattern. It remains to be seen whether wave (b) of y (circled in red) has completed or would take more dip to $39 or below. By extension, wave y (circled in red) potential terminus has been set to $42 where we have the 100% Fibonacci projection of wave w from x. From there, wave C could start its bearish journey. Will Covid second wave be the trigger? We shall see.

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