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⛽ WTI Crude Oil: Decoding the Corrective Rally (January 2019)

Title Image - WTI Crude Oil Elliott Wave Forecast and Analysis - 190124

The market was coming off a major low, and the action seen in the preceding weeks indicated that a larger, multi-stage correction was underway. We were focused on a large Green Wave B correction, which itself was unfolding in three sub-waves: Blue Wave A, Blue Wave B, and Blue Wave C (an internal a-b-c zigzag structure).

The First Leg Up: Blue Wave A Completed

Our count suggested that the initial strong bounce from the extreme lows had successfully completed the first leg of this corrective structure:

  • Blue Wave A: finished its run higher at $54.48 per barrel. This impulsive move confirmed that the immediate selling pressure had temporarily eased, paving the way for the internal correction.

The Immediate Focus: Blue Wave B Correction

Following the completion of any impulse wave (like Blue Wave A), the market typically pulls back to form the second corrective wave. Our analysis identified that the price was currently engaged in this pullback phase:

  1. The market was actively developing Blue Wave B of the larger Green Wave B structure.
  2. Target Zone: This corrective move was expected to find support and conclude in the $49.50 to $49.80 area. This zone likely represented a key Fibonacci retracement level of the preceding Blue Wave A, or a prior area of support, making it a high-probability reversal point.

The Final Push: Forecasting Blue Wave C

Once the pullback of Blue Wave B finds its low and reverses, the market should start the final, most energetic leg of this large correction:

  1. Blue Wave C is the final impulsive move within the Green Wave B correction. It is expected to push prices significantly higher.
  2. Final Target: We forecasted that Blue Wave C would target the $58.00 to $60.00 area. Reaching this range would mark the completion of the entire large Green Wave B correction, after which we would anticipate the resumption of the original long-term trend (likely a decline). This target range often aligns with the 61.8% or 78.6% Fibonacci retracement of the move that preceded the Green Wave B correction, or where Wave C equals Wave A.

🎯 Short-Term Trading Strategy: Capitalizing on the Pullback

This specific stage presented an opportunity for traders looking to fade the immediate rally and profit from the expected pullback (Blue Wave B) before the next upswing (Blue Wave C).

  1. Entry Strategy for Sellers: Traders who believed in this corrective path could consider entering a short position at the current market price (around $52-$53) or waiting for the price to test minor resistance levels, looking for confirmation of the move into Wave B.
  2. Profit Target: The clear objective for this short-term trade was the expected completion zone of the Wave B pullback, specifically the $50.00 area (which encompasses the forecasted $49.50–$49.80 range).
  3. Risk Management (Stop Loss): Protecting capital was key, and the stop loss was recommended at $53.50. Placing the stop here acknowledged that a clear breakout above the Blue Wave A peak ($54.48) would invalidate the current Blue Wave B correction entirely, suggesting that the Blue Wave C upswing had either begun immediately or that the structural count was incorrect.

🛑 Long-Term Caution: Don't Forget the Big Picture

While trading the Blue Wave B correction offered a quick profit opportunity, investors needed to keep the bigger picture in mind:

  1. Correction, Not Trend Reversal: The entire move from the low up to the $58–$60 target was still fundamentally a correction (Green Wave B). It was not the start of a new, sustained bull market.
  2. Major Resistance Ahead: The $58–$60 zone was forecasted to act as massive, long-term resistance. Once Green Wave B completed here, the probability of a major reversal and a renewed, sustained decline would become extremely high.
  3. Potential Risk: Trading crude oil is volatile due to geopolitical events, OPEC decisions, and global economic health. This technical analysis provides a roadmap, but traders must always use disciplined position sizing and strict stop losses.

Key Takeaways for WTI Crude Oil

Wave Range Expected Action
Blue Wave A $54.48 (Completed) Initial recovery impulse.
Blue Wave B $49.50 – $49.80 Current Corrective Dip
Blue Wave C $58.00 – $60.00 Final rally impulse.

This structured Elliott Wave perspective gives us both a short-term trading plan (selling the Wave B dip) and a medium-term investment roadmap (buying the Wave C rally), all while maintaining a clear, non-emotional view of risk and potential.

Quote of the Day

“Volatility is not the enemy — it’s the test of discipline”

Crucial Risk Management Advice

Crucial Advice: Effective trading is based on disciplined risk management, not prediction certainty. Always use a firm stop-loss to protect your capital. Macroeconomic news, particularly from the Federal Reserve or the European Central Bank, can override any technical pattern instantly.

Profile Image of Ghulam Muhiuddin, Certified Technical Market Analyst, 18 Years of consistent market analysis and forecasting</strong>

About the Author

Experience: This analysis reflects the insights gained from 18 Years of consistent market analysis and forecasting, specializing in the application of the Elliott Wave Principle and advanced technical structures.