Oil Continues to Slip Lower - Low 40's Coming?

FX:USOIL   Crude Oil (WTI)
3198 17 27
Many times in the past, I’m asked how/where you begin counting Elliott Waves . There are 3 patterns I look for: 1) 5-3 combo, 2) Equal Wave Patterns, 3) Triangle patterns.

This morning, a triangle came to light that unlocked some wave relationships that are causing me to change my tune on Oil             . (For those who attended the US Opening Bell webinar this morning, I was bullish Oil             . In light of seeing this triangle below, I am changing my tune to bearish .)

When I changed the time frame of chart, the triangle in late April was exposed. When drawing the 2-4 trend channel based on blue ‘iv’ triangle in late April, it created an incredibly clean trend channel (red channel). These trend channels are useful for determining ending points for the fifth waves, in this case blue ‘v’.

This is important for a couple of reasons. First, notice how prices couldn’t penetrate the mid-line on May 6 (the dotted red line). This is quite bearish . The opposing end of the trend channel is the typical stopping point, yet in this case it couldn’t get half way there!

Secondly, this upward push could be the end of circle ‘iv’. Fourth waves typically retrace about 38% of its third wave. In this case, the 38% retracement level was at 63.50 and prices came very close to this level.

Therefore, with a very bearish ending wave to the upward push that exhausted near an important fib level, we elevate the bearish counts in the green notes. Both counts in the green box call for a move below 45.

If you like, give a thumbs up and follow. Feel free to share your EW counts on Oil             as well.
Where does your count become invalidated? Where do you stop out a short position on the way up? More particularly, how do you have a tiny wave (ii) and a giant wave (iv)?
+1 Reply
Tim, those are excellent questions. I appreciate you sending them through.

Where does the count become invalidated?

The count shown on the chart is scenario #1. In the notes of scenario #1 (green note box) you’ll see that the May 8 low of 58.11 should not be broken for it to remain valid. I admit, I could have instilled more clarity on that comment in the chart.

Where do you put a stop out on a short position on the way up? Since 58.11 is the invalidation point, 1 pt. above there 58.12.

How do you have a tiny (ii) and giant wave (iv)?

This is certainly the most concerning about the #1 scenario, but the near term implications are still the same. The wave down from July 2014 is an extended 3rd wave. I’m still showing this 4th wave is still a part of the extended 3rd wave. We could slide waves 1-2 to the left and have them cover Sept 2013 (1) to June 2014 (2). (see image below)


Regardless of whether waves 1-2 are placed in Sept 2014 or Sept ’13-June ‘14, the down trend still counts as incomplete. That makes the near term implications for a sell-off under scenario #1 or #2 still the elevated possibility in the green notes.

Tim, thanks again for the questions. Best of luck in your trading!
+1 Reply
TradingEW timwest
On question: how do you have a tiny wave (ii) and a giant wave (iv)?
Isn't it a basic EW guideline of Alternation that 2nd waves and 4th waves alternate in duration, complexity and price range (size) ?
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Indeed - thank you for sharing.
Thanks for this! I had been watching this one myself, but didn't have all the detail of the sub waves within wave 4! :)
You might be right, but how do you combine the fib-retracement which has not happened yet for further down? That will lead for more retracement, right? Also it is still trading within my channel and daily and lower tf's are oversold very bad. Daily rsi shows also bullish div, but I don't rely on rsi only for divergence.

Hi Lighthouse - I'm not sure I understand your first question. The fib retracement of 38.2% is based on the original chart shown above. Prices came very close to hitting it so the upward retracement could be considered over. Are you referring to something else?

So, I also have my eye on USDCAD right now...it is at a confluence of wave relationships. If USDCAD breaks higher above 1.2800 it would be significant enough to clear for the next levels higher, that may accelerate Oil lower through your channels.

I'll have a USDCAD chart posted later on with analysis...stay tuned.
One separate point I'll follow when Oil or CAD take on strong price gyrations that is worth noting and that is Brent vs WTI.

Canadian's purchase oil at the retail pump mostly based on Brent. Producers sell oil more heavily weighted on WTI (and West Canada Select). Therefore, if WTI cannot keep up with Brent, CAD likely suffers. On the flip side, if WTI outpaces Brent, CAD may outperform.

Here's a recent chart of that comparison. Some food for thought.

Yahia.Awes JWagnerFXTrader
This tells me we must be rebounding.
UPDATE: some wave clusters near 54 - may be a reactionary zone to sell


That lines up with the USDCAD chart which suggests support near 1.2600 (original post linked in above...updated picture below)

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Hi man, agree with w4 count but slightly disagree with w5 down count
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aibek aibek
the one is leading diagonal
Nice chart - I was kicking something similar to your image around. I was concerned about the circle iii as being the shortest of i,iii, and v. The result sends us to the same place with more subdivisions to go lower.

Do you follow USDCAD? Do you have a count for it? Thanks.
+1 Reply
aibek JWagnerFXTrader
Hi J! (Tell me you first name pls)
You are right, I made recount and checked with EW website, they count different with both you and me here is the link http://www.elliottwave.com/images/freeupdates/image/mw%252007-05-2015oil.png
I am not following USDCAD at all, can't share the count though but you are right I should as it can give some clear clues, thanks for this hint.
You comparative chart of oil vs cad convinced me to follow the fx cross either.
Here is quick labeling for usdcad.

could you share your larger TF labeling please?
Jay, looks like C done long ago, see the comparative chart below I mad it specially for you my friend.
That looks like a mega falling wedge with divergence.
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