Crude Oil gained about $2 after Saudi Arabia decided to reduce their Oil exports. Technically, we were looking for more dip to $45 before the rally resumes. Despite the bullish spike caused by the announcement, it’s still possible that the bearish move will continue. Why do we believe this?. There is an answer below.
At the larger degree we realized, as we have pointed in an old update, that a triangle pattern is still emerging on the daily chart. Triangle patterns have 5-sub waves with each showing corrective structures. Price completed the d-leg at $52.8 before dropping. The last leg -wave e could still play out deep. In the last update, we used the chart below.
Price usually reverses at important levels. We will watch out for price reaction at $48 and $46. The final bearish target is at $45 but these levels are very important. Besides, the e-leg of a triangle pattern is ‘truncated’ sometimes – doesn’t go as deep as expected.
The last leg is expected to be a zigzag (double zigzag more probable). The b-wave was just a bit above $51. With the Saudi declaration causing a spike above wave b top, a double zigzag could play out as shown below.
A strong dip is still highly probable to $47 or even deeper to $45 before the bullish resumption. Alternatively, if price rallies to break above $51.4 top, then it could test the $52.8 top and our triangle will be considered truncated. We favor the bearish continuation until price proves otherwise.
Do you have an alternative view? please share with us in the comment box below.