Today I want to share my vision of the technical picture for Brent crude oil.
I want to note right away that this spring, oil completed its five-wave downward, which began in September 2018.
The first decline that should be counted from was the descent of $ 86.74-49.93 per barrel and it lasted from September to December 2018.
Then wave 2 followed with corrective growth to $ 75.60 per barrel, it was exactly 61.8% to the wavelength 1.
The longest and, as usual, the longest was wave 3, it went from $ 75.60 to $ 21.65, its length was $ 53.95 (3 = 1.382 of length 1).
Wave 4 bounced off to $ 36.40 per barrel, correction to wave 3 slightly exceeded the 23.6% Fibonacci level, but could not rise until the next line.
Wave 5 turned out to be fast and short (just over 0.5 length to wave 1) from $ 36.40 to $ 15.98 per barrel. By the way, the sum of the lengths 3 + 5 gave an extension of 1.618.
As we know, after a five-wave decline (impulse), there is a correctional wave (zigzag or ABC). In my opinion, wave A gave us an increase to $ 46.53 per barrel ($ 30.55 length), wave B turned out to be shallow, giving a pullback to $ 35.74, and from this line the second part of the zigzag wave C.
Wave C often depends on the wavelength of A.
Let’s consider the most likely options:
Wave C = 0.5A, target – $ 51.015 (executed)
Wave C = 0.618A, target – $ 54.62 per barrel,
Wave C = 0.764A, target – $ 59.08 per barrel,
Wave C = A, target – $ 66.29 per barrel. I think the lengthening options are irrelevant.
Now let’s try to figure out which of these options are the most promising. Earlier, I wrote that I expect oil recovery to $ 55-60 per barrel.
I can explain this corridor as follows: firstly, if a downtrend line is drawn from the peaks of 2018 on the monthly chart, now it will fall approximately to the zone of 59.70-60 + $ per barrel. Secondly, if you measure the entire fall of $ 86.74-15.98, then a 61.8% correction to it points to $ 59.70 per barrel.
Thus, we see that in addition to the execution of variant C = 0.76A, the region of $ 59-60 per barrel itself is rich in all kinds of resistances.
Why do I think that option C = 0.5A is not suitable?
Yes, if only because we still have a gap in time, wave C began recently, December is only the second month of an increase. And if you look at history, then in the commodity market there are often from 4 to 5 candles growing in a row. In addition, the wave A itself first showed a sharp increase in the period of April-June, which changed to a slow movement until the end of August 2020.
So we can look positively at the oil market in the perspective of at least the first quarter of 2021. and expect movement towards $ 55-60 per barrel. Particular attention should be paid to the level of $ 59.70-60 per barrel from which a correctional movement may begin, but it is too early to think about it …
Scavo (Ignatenko) Anastasia