Crude oil prices falter at the beginning of this week after spending most of October in a bullish correction. The following analysis is based on the Elliott wave theory.
October 29, 2019 | AtoZ Markets – Oil prices have started this week on the downside. There has been a wait for over three weeks for when the bearish run from mid-September will resume. For the best part of the last three weeks, Oil prices went on bullish corrections to complete price patterns that are recognisable. The bearish run was expected to continue at the end of the correction. Has the short-term bullish corrective phase completed? Will Oil prices drop to their lowest price since September? Let’s look at the two Oil benchmarks – WTI Crude and Brent Crude.
Elliott wave analysis: crude oil prices falter
WTI Crude analysis
After the 5-wave dip from $63 to $51, WTI price started a bearish correction. In the last update, where we used the chart above, we identified a double zigzag pattern. The double zigzag pattern is one of the corrective patterns discussed in the Elliott wave theory – often slow and shallow (usually 50% Fibonacci retracement). 100% Fibonacci extension of wave w from x was at $56. In addition, the 50% retracement of the prior bearish impulse wave was around $57. Eventually, that gave us the $56-57 strong price reversal zone where would be looking for bearish signals. The price hit the zone and reversed as the chart below shows.
The chart above focused more on the corrective structure. A double zigzag completed at the reversal zone. In addition, an ending diagonal reversal pattern completed at the top and WTI crude slumped to $55 ( top of wave w). This is the first phase of the continuation of the short-term bearish run from $63. From $56.9 top, we have started counting a bearish impulse wave that should continue to $47. At the end of wave ii, swing/short term speculative sellers could look for entry below $55. This setup will be invalid if the price hits above $56.9. However, until a break above $60 happens, the bears will still have a big chance to take back the market in the short term.
Brent crude analysis
Meanwhile, a similar scenario is playing out on the Brent crude as revealed in the last update. A double zigzag pattern was completing as the chart below shows.
As the new chart below shows, the price was a bit short of the reversal zone. It completed an ending diagonal and slumped to $61.
If the price returns to break below $60.75, we should expect a bearish impulse wave swing to $55 or below. Crude oil prices falter from the new October highs and might falter deeper.