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Elliott Wave Analysis: How Much Further Can Oil Drop?

Short term Elliott Wave view on Oil suggests that the decline starting from Oct 3 high ($76.9) remains in progress as a 5 waves impulse Elliott Wave structure. Down from Oct 3 high, Primary wave ((1)) ended at $68.47 and Primary wave ((2)) ended at $69.66. Primary wave ((3)) ended at $54.75 and Primary wave ((4)) is proposed complete at $57.37.

Consistent with the guidelines in Impulse Elliott Wave structure, Primary wave ((3)) also unfolded as 5 waves of lesser Intermediate degree. Down from $69.66, Intermediate wave (1) of ((3)) ended at $65.74 and Intermediate wave (2) of ((3)) ended at $67.95. Intermediate wave (3) of ((3)) ended at $59.26, Intermediate wave (4) of ((3)) ended at $61.28. The final leg Intermediate wave (5) of ((3)) ended at $54.75.

Primary wave ((4)) ended at $57.37 as a double three Elliott Wave structure. Wave (W) of ((4)) ended at $56.49, wave (X) of ((4)) ended at $55.53, and wave (Y) of ((4)) ended at $57.37. Near term, while rally fails below $57.37, and more importantly below $61.35, expect Oil to extend lower. If Oil breaks above $57.37, then Oil is doing a double correction and can open more upside in 7 swing before the decline resumes. For the downside target, one way to measure wave 5 target in Elliott Wave Theory is wave 1 equal to wave 5. If we project wave ((1)) length to the beginning of wave ((4)), we can estimate potential target for wave ((5)) at $47 – $49. We don’t like buying Oil.

Oil 1 Hour Elliott Wave Chart