October 8, 2020 - AtoZMarkets - The crude oil market is back on the upside after the September sell-off. WTI is retesting the 200 day EMA after failure to breach it around Mid-September. It remains to be seen whether the black commodity would surge to the $42-43 resistance zone. However, if the surge from the $36 low end with a corrective pattern, WTI will most likely push lower toward $30 in the medium-term. Covid second wave amid economic recoveries and the upcoming election in the US would be the major events energies traders would focus on.
The crude oil market has returned bullish in October to keep up the bullish pace in the face of Covid second wave. There are fears that the second wave of the pandemic would lead to more lockdowns and thus crash the demands for energy products. Since Covid, OPEC supply glut is no more the main issue on the table. Rather, energies are driven largely by market risks and demand.
WTI Crude Elliott wave analysis
Technically, WTI was expected to make a 3-wave bearish correction after completing a wedge pattern around $43.5. According to the Elliott wave theory, a bullish impulse wave should be followed by a 3-wave bearish correction. That is the technical outlook based on the WTI crude Elliott wave analysis.
Chart from TradingView
A wedge/ending diagonal pattern completed the bullish impulse wave recovery that following the January-April 2020 Covid-19 forced crash. The dip to $36.14 dollar seems to have completed the first leg of the bearish correction - wave A (in black). The current surge is completing a 3-wave leg for wave B. Although wave B is taking far longer time than A but until a break above $43.7 happens, WTI could still return downside. As the chart above shows, WTI wave B could hit $42 before WTI returns downside to complete wave C.
The technical projection for wave C could hit $27 or even $22 before the long term bullish recovery continues. . A simple or double zigzag pattern is quite very much likely if the market takes this path. However, $43.7 remains the resistance level to beat. A break above this level would jeopardize the bearish expectation and set the energy markets farther upside.
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