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Crude Oil - dropped as expected
In my last macro update posted on 22 May 2019 I shared my bearish expectations.
Back then I wrote: “I count the drop off the top made at 78.54 in October 2018 into the low at 43.59 in December 2018 as the first leg down in the wave ( A ) of ( 5 ). The rally that followed had a corrective A-B-C structure and looked like a bull trap set up by wave ( B ) up.”
“There is mounting evidence on the micro scale that the rally in wave ( B ) up has topped. From here we have two alternative bearish paths.
The blue path implies a direct drop to a new lower low under the lows reached in 2016. The alternative red path implies a drop to 52-48.50 and then another rally in wave C of ( B ) up.”
Crude Oil - daily chart updated on 5/22/2019
On June 5th, 2019 Crude dropped to $50.60, into the Demand Zone I provided in May 2019 (see above). We still have two alternative paths at the table. If that is the red count (chart above) we may get another rally in wave C of ( B ) up that could stretch to over $66.
If that is the blue count (chart above) Crude will keep moving lower to a new lower low in wave ( C ) of ( 5 ) (blue labels on the chart above).
Now let’s zoom-in to 30 min chart (chart below). It shows the structure of the decline off the top made at $63.96 on May 20th, 2019. We still can not be sure if that decline is completed. This decline could be wave B down on the weekly chart above. Once it bottoms then we may get a rally in wave C of ( B ) up. That is why it is so important to closely track that structure.
On that 30 min chart below we have been counting an impulsive looking decline. It really looks like it will stretch lower in wave ( c ) of ( v ) to test $50.00 level.
The only question is when that wave ( c ) of ( v ) will start. Yesterday I posted that chart below. It implied we would get a bullish pullback from the low made on Wednesday, June 12th. Both alternative paths, the blue and the red ones expected a move up of different magnitude.
Crude Oil - 30 min chart updated at 3-15 PM on 6/12/2019
As I predicted at 3-15 PM on June 13th, crude started to rally. As you can see on the 30 min chart above both alternative paths pointed higher. On the same updated chart below you can see that it rallied strongly off that low made yesterday.
Crude Oil - 30 min chart updated at 9-15 AM on 6/13/2019
Now let’s make one step back to see a bigger picture. I want you to understand where we are in Crude on a weekly chart. When I talk “bullish” and “bearish” scenarios do not make mistake, they are both long term bearish!
The “bullish” count assumes a bigger bounce before the final drop to a new lower low and that bounce may last weeks.
So for us, short term traders, that would be a meaningful move up. The “bearish” count implies that the corrective wave B up (see the chart below) topped at $63.96 on May 20th, 2019. That scenario implies we are in a trending move down targeting new lower lows under the bottom made in February 2016. I will keep watching the structure of the decline off that top made in May 2019 (see the 30 min chart above). It looks like Crude will drop again to test $50 level. But if you come back to the very first chart on this page you will see that this drop will still be inside the strong demand zone located in between 52.50-48.56 and I would be taking every completed downside structure as a setup to go long.
Crude Oil - Model Fractal
