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CVX - this is a case of invalidation of a long term bullish count
Before I show you an actual Monthly chart of CVX I want to remind you one important rule of the Harmonic Elliott Wave theory (see the Model chart below).
A corrective wave ( 4 ) can NEVER violate the low made by the previous correction, subwave ( B ) down of wave ( 3 ) up.
Model Chart of the Five Wave Up fractal
But this is exactly what happened to CVX in March 2020 ( see the monthly chart below).
The low made by subwave ( B ) down was 55.50 ( Oct 2008 ).
In March 2020 it dropped to 51.60.
That is called “invalidation” of the bullish count.
When that happens you should not longer consider that fractal reliable and you should NOT expect a rally in wave ( 5 ) targeting a new higher high.
However, one thing you should remember about cases like that.
When such a critically important support is violated that does not necessarily mean that the price will keep falling like a rock.
Instead normally price pops over that support again as if nothing really happened.
Price behaves like a child who got caught doing bad stuff and even he or she realized she will be punished but still hopes parents will forget if she still smiles.
Well, bulls never forget that violation.
After a pop making a lower high or even two pops the price will most likely drop under that support again.
Now when the Five Wave up fractal is broken we are left with tracking a macro (A)-B)-(C) move down following another (A)-(B)-(C) move up.
That is not that bad at all.
If we get nice five waves down inside a large wave ( C ) down that would be a decent long setup.
So far it has been in a corrective wave 4 up.
We need to get another push to a new lower low under $50 to start looking for a long entry.
CVX - Monthly chart updated at 12-20 PM on 4-15-2020
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