Crude Oil prices rally on Tuesday following optimistic tones from the US/China trade talks. The following technical analysis is based on the Elliott wave theory.
October 22, 2019 | AtoZ Markets – The energy market was on the upside on Tuesday after spending the larger part of the month on the sideways. The bearish run that started in mid-September is still intact. However, prices have gone range-bound since October 3. WTI Crude is currently trading at $54 per barrel while the Brent crude goes for $60 per barrel after over 3.5% surges in the last 24 hours. US and China have continued to maintain optimism that a deal is done and the two parties will be able to meet their ends of the bargain.
Technically speaking, short-term sentiments support the bulls. However, the medium-term market direction is still bearish. Besides, the current rallies look corrective from their respective October 3 low. The bulls will have to be careful because the current resurgence might not last. However, current crude oil prices rally could continue a bit further.
Crude oil price Elliott wave analysis
The following analyses are based on the Elliott wave theory. According to the last update, we discovered that WTI and Brent price charts were emerging into impulse wave patterns. However, the prices couldn’t breach below the October 3 lows. With the current correction taking longer time than expected, we will have to take a new outlook.
WTI Elliott wave analysis
In the last update, we used the chart below.
WTI wave iv ended between $54 and $55 (38.2-50% Fibonacci retracement zone). However, the bears lacked the required momentum to cause a break below the $51 low (end of wave iii). Wave iv has now taken over a week more. Comparing it to wave ii, wave iv is stretching out of proportion as the new chart below shows.
The adjustment now is to consider the impulse wave from $63 has already completed at $51. The rally from $51 is now the ‘a-b-c’ bullish correction emerging into a double zigzag pattern. The bullish correction could continue to $55-57 before the bearish trend of this degree continues below $50.
Brent Oil Elliott wave analysis
A similar pattern is emerging on the Brent crude price chart. We used the chart below for Brent crude oil in the last update.
Just as we had with WTI, the Brent price couldn’t break below the $57 low. The commodity is currently emerging into a more complex bullish corrective pattern.
The chart above shows a double zigzag correction could complete at $62-$64 Fibonacci zone before the bears return the price downside to $55 or below.