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WTI Crude Oil Elliott Wave Forecast and Analysis - 22-Jan-2026

Title Image - WTI Crude Oil Elliott Wave Forecast and Analysis - 260122

Summary

Refer to our previous anlaysis . Crude oil prices are currently unfolding a critical phase within a broader bearish Elliott Wave structure. Based on wave count analysis, Blue Wave 4 completed at 62.19 on 14 January 2026, and the market has since entered Blue Wave 5, which is expected to drive prices significantly lower in the coming sessions. This article explains the wave structure step by step, outlines high-probability trading scenarios, and briefly discusses short-term fundamental drivers that may influence price action over the next 2 to 10 days.

Understanding the Bigger Picture: Blue Wave Structure

Elliott Wave Theory explains that financial markets move in repeating cycles that are driven by collective crowd psychology, where a full market cycle is made up of five impulsive waves moving in the main trend direction, followed by three corrective waves moving against it. In the case of crude oil, Blue Wave 4 was completed at the price level of 62.19 on 14 January 2026, and this wave itself developed as a corrective ABC structure, labeled as Red Wave abc, indicating a pause and consolidation within the broader trend. Once Blue Wave 4 was fully completed, the market shifted into Blue Wave 5, which is normally the final impulsive phase of the overall wave sequence and often carries strong directional movement. Considering the bearish momentum that was already present before this transition, Blue Wave 5 is expected to stay biased to the downside, with an ideal longer-term target zone projected around the 48 USD level.

Breakdown of Blue Wave 5

Blue Wave 5 is unfolding as a classic five-wave impulsive structure, internally labeled as Red Waves 1 through 5, which signals continuation of the dominant bearish trend. Within this structure, Red Wave 1 has already been completed at 58.52 on 19 January 2026, and this initial decline confirmed that the market had transitioned from a corrective phase into a new impulsive downward move. At present, crude oil prices are trading within Red Wave 2, which represents a corrective retracement of Red Wave 1 rather than a trend reversal. Red Wave 2 is corrective in nature and is developing as a Green Wave ABC pattern, with current price action unfolding specifically in Green Wave C of Red Wave 2, indicating that the correction is approaching its later stage before the next impulsive decline begins.

Once Green Wave C completes, Red Wave 2 will also finish, setting the stage for the strongest decline of the sequence.

Expected Completion Zone for Red Wave 2

Based on Fibonacci retracement and Elliott Wave guidelines:

  • Ideal resistance / completion area: 61.00 – 61.50
  • This zone lies below the invalidation level and represents a typical corrective retracement for Wave 2
  • A rejection from this area would confirm that sellers are regaining control.

High-Probability Trading Scenario (Ideal Case)

Primary Bearish Scenario

  • Entry: After confirmation of Red Wave 2 completion
  • Stop Loss: Just above 62.19 (Blue Wave 4 high)
  • Targets:
    • First target: 56 USD
    • Second target: 54 USD
    • Extended target (Blue Wave 5 completion): 48 USD

Red Wave 3, once it begins, is expected to be sharp, impulsive, and fast, as third waves usually carry the strongest momentum.

Alternative Scenario & Invalidation Level

Bullish Invalidation Scenario

  • A sustained break above 62.19
  • This would invalidate the current Elliott Wave count
  • In such a case, the entire structure would need to be recounted, and bearish bias would be temporarily neutralized

Risk management remains critical, as Elliott Wave analysis is probabilistic, not predictive.

Simple Elliott Wave Explanation for Learners / Beginners

  • Wave 1: Initial move in a new trend
  • Wave 2: Correction that does not break the origin of Wave 1
  • Wave 3: Strongest and longest wave
  • Wave 4: Sideways or complex correction
  • Wave 5: Final push before trend exhaustion

In crude oil, we are positioning at the start of Red Wave 3 inside Blue Wave 5, which historically offers high reward-to-risk setups.

Short-Term Fundamental Drivers (Next 2–10 Days)

While this analysis is technically driven, fundamentals can act as catalysts:

1. US Dollar Strength:

A firm US dollar typically pressures crude oil prices lower.

2. EIA Crude Oil Inventory Reports:

Unexpected inventory builds could accelerate downside momentum.

3. OPEC+ Communication:

Any rhetoric about production stability (rather than cuts) may reinforce bearish sentiment.

4. Global Demand Concerns:

Slowing industrial data from China or Europe could weigh on energy demand expectations.

These factors may help trigger Red Wave 3, but the direction remains aligned with the technical structure.

Crude oil is approaching a critical decision zone within Red Wave 2 of Blue Wave 5. As long as price remains below 62.19, the broader bearish Elliott Wave scenario remains valid. Traders should remain patient, wait for confirmation near resistance, and focus on disciplined risk management.

The coming sessions could define the most powerful leg of the decline, making this a technically important period for crude oil traders.

Wisdom from Past

Oil is the lifeblood of modern economies, and its price reflects fear, confidence, and expectation all at once. - Uknown"

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.