Crude Oil Chart with Elliott and RSI from Laszlo’s Trading Room

Following the harsh bear spiral on the crude oil market in 2014, not much price change has happened so far this year. The year’s overall sideways look, and the sustainable bear RSI levels on the weekly chart, suggest the continuation of the bearish tendencies.

As we put it in the Glossary section of TraderSkillset.com, when the RSI bottoms below 34, it’s best to view any subsequent price strength as just a correction in an ongoing bear trend and expect the market to form lower lows in the sequence. (For full definition check the Sustainable Bull Territory post). This supports the following interpretation of the crude oil weekly price structure:

A weekly price chart of the crude oil with RSI, November 6
Crude oil’s bear trend is sustainable and not over yet. Limited potential to the downside.

Yes, I do see the divergence between the most recent lows, but the sustainable momentum reading overwrites the deceleration’s impact, and eventually it’s very likely we’ll see new lows. Both legs of this “bullish” divergence formed below the gray horizontal line on the RSI pane. Imagine how those bulls who bought the divergent lower low in August feel! I tell you frankly they are just left with ‘tense hopes’ by now.

I don’t expect the final low too far below $36 a barrel. And, at that point, oil prices might just transition into a lengthy – maybe multiyear – ranging phase due to the evident loss of bearish momentum.

Next, the daily chart shows the short term price action within the developing (black) Minor degree wave 5.

Daily Crude oil chart with Elliott Wave labels
The RSI touches bullish support at 38 and brings some short term misalignment into the otherwise bearish picture.

The daily RSI low of 38 is cause for some concern, from a bearish perspective, because in the context of the clear weekly downtrend it may mean a wave B low of developing larger degree fourth wave correction. It would imply that (black) wave 5 of Intermediate wave (3) was already in place at the August low, and that the larger consolidation from below 36 is already on the way. But, this is just the alternative case for now. I assume the market will show its hand in the next three to four weeks, if another leg up is the road to follow. In that scenario the dotted green corrective channel should contain the larger degree wave four price action.

The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.

About Laszlo Nagyferenczi

Laszlo Nagyferenczi is a day trader, analyst and instructor as well as the creator of the proprietary Context-Momentum-Signal concept. He has authored over 200 blog articles about his unique approach to trading and the Elliott Wave Theory. His clients appreciate his ability to go from the theoretical to the practical i.e. all the way to the actual trade set ups. Originally hailing from Hungary, Laszlo is fluent in English and Hungarian with a long list of education credentials including BA in Economics, Certified Elliott Wave Analyst (CEWA), Certified Adult Educator for T-Groups, Professional Co-Active Coach (PCC) at CTI. The real education, though, has been the trial by fire in the markets, with real capital at risk.

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