Home Daily Analysis Charts / Trade Ideas Is Oil Group Losing Momentum? – Part 2

Is Oil Group Losing Momentum? – Part 2


In the first part of this three-part series posts, we review what means the sideways Crude Oil structure and what to expect for the coming days. In this article, we evaluate the Brent Oil situation applying the Elliott Wave Theory.

Brent Oil – Movements Delayed?

Brent Oil completed a second bullish leg this week. If we compare the movements between Crude Oil and Brent Oil, we observe that USOil completed the bullish second leg before than UKOil. The current bullish cycle started in December 2018, when the price bottomed at $50.29. From this level, the price started a 5 waves sequence, and on January 2019 at $50.48 started the second bullish leg.

However, the question that raises is: The second leg completion in UKOil means that the Oil Group will start a reversal sequence soon? Probably, if we are harmonic traders and expect the reversal of a perfect AB-CD pattern, we could be tempted to turn the market from the current bullish bias to bearish. Whatever be the reason, to answer the question of what is next? We must analyze the structures in lesser timeframes.

The 4-hours chart

UKOil in the 4-hours chart shows an inner second leg completed, which confluences with the end of the upper degree second bullish leg. This situation could bring us the idea to turn the market, trying to be the first in to sell this market. However, the situation is different. To aid to make clear the next movement, we must analyze them in a lesser degree if the cycle is complete.

If we compare once time again Brent Oil against Crude Oil, we can appreciate that wave four still is not running. Considering the alternation rule, the fourth wave structure in Brent Oil should be complex.

What Next?

The 1-hour chart looks almost confusing, but let’s make it more simple to comprehend it. In the first place, the second leg starts at $59.48 making 5 waves, three bullish waves, and two correctives. Once completed this bullish internal wave, the price started a corrective sequence completing the second wave. In the second place, we can trace an ascending channel which gives us a clue for the third wave target.

With the first and second waves completed, we put our eyes on the third wave. The internal ascending channel provides us with a critical clue because we suspect that the fourth wave is not completed. Supporting us with the expansion Fibonacci tool, we foresee that the price could retrace to $70.88 level, from where the price should continue developing a corrective structure. Likely the corrective structure is like the fourth wave in Crude Oil. The bearish failure should drive to the price to the confluence area between $75.56 and $76.83. The invalidation level of the bullish process is $64.08.

Remember that the price is not forced to move as in our forecast. Charts released corresponds to the Elliott Wave Theory application.


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