Crude Oil Nearing The End Of Elliott Wave Triangle Pattern

Executive Summary

• Crude oil reached 85.95 this week.
• This week’s low could mark the end of a mulit-month triangle.
• Crude oil may rally to above 115.

Crude oil barely punched a new low on Tuesday at 85.95. It is possible to consider a large symmetrical triangle is completed and that crude oil prices are beginning another uptrend. If Tuesday’s low isn’t the low, a meaningful bottom likely develops between 79 – 82.25.

Current Elliott Wave Analysis

The current Elliott wave pattern shows crude oil may have completed a 3-month triangle pattern at yesterday’s low of $85.95.

Triangle patterns consist of 5-waves labeled A-B-C-D-E. 

Each wave of the 5-waves must be a zigzag, multiple zigzag, or triangle pattern. Well, it appears wave E of the triangle was a triple zigzag labeled ((w))-((x))-((y))-((x))-((z)).

There is a cluster of wave relationships sitting near this week’s low.

Wave ((z)) is .618 times the length of wave ((y)) at 85.73.

Wave ((y)) is equal to wave ((w)) at 84.91.

Also, wave E is 78.6% retracement of wave D at 84.87.

With this week’s high just above these levels, crude oil is finding a hard time pushing down to lower levels.

The on again off again peace deal may be setting up for a large rally in crude oil. Initially, prices may spike lower, but I wouldn’t be surprised to find a peace deal formally marks the end of the triangle if this week’s low is not the low.

That may seem counterintuitive at first, but it is common for large Elliott wave patterns to end on news that appears counterintuitive.

The reality of the matter is the crude oil is a physical product and it still remains in short supply even if the Strait of Hormuz is reopened today. This is because it will take time for those tankers to move the oil around the world. Meanwhile, nations continue to draw down their stockpiles of oil. 

Once the oil flows again through the Strait, nations will want to rebuild their oil supplies creating a sticky demand for oil several quarters into the future. This shortened supply and sticky demand will help support oil prices for the next several quarters.

If crude oil prices do spike lower, 79 – 82.25 may contain the dip.

Bottom Line

Crude oil appears to have completed a large triangle pattern this week and is poised to rally above $115.

If today’s low is broken, we suspect new lows will be temporary and hold above the wave ‘C’ support low at $79.