Current Market Structure:
According to the Elliott Wave Principle, USOIL appears to be in a corrective phase, specifically in Wave 2 of the broader cycle. In this phase, we are observing what seems to be a three-wave structure, often called an ABC correction. This aligns with the common pattern where Wave 2 tends to be a deep retracement of Wave 1.
Key Insights:
- Wave 2 Corrective Phase: Currently, USOIL is experiencing this corrective wave, and based on the analysis, we are inside Wave C of this corrective structure. This means the market is expected to make lower lows in the near term as the correction completes.
- Sub-Wave 3 of Wave C: More specifically, we are in Wave 3 of Wave C, which is typically the most aggressive and directional portion of the Elliott Wave sequence. This suggests that more downside movement could be expected before a relief rally.
- Key Fibonacci Support Levels: The chart highlights key Fibonacci retracement zones (50% – 80% retracement levels). These levels are critical support zones for the ongoing correction, and they range between $80 and $50 per barrel. These Fibonacci levels are derived from Wave 1’s high, and they are often tested during Wave 2’s retracement.
- Bullish Long-Term View: While the current correction may seem bearish in the short term, it’s important to note that corrections such as these (within an Elliott Wave framework) set the stage for the next major impulse wave. Once the corrective Wave 2 concludes, the market is expected to pivot into Wave 3, which tends to be one of the strongest and most bullish waves in the sequence. Therefore, while the immediate trend might involve further declines, the broader market context remains positive.
- Potential Wave 4 Bounce: Following the completion of Wave 3 in the correction, a Wave 4 rally is likely to occur. This will serve as a temporary relief rally, offering short-term upside potential before the final Wave 5 lower. This may present traders with an opportunity to capitalize on short-term bullish setups before the completion of the corrective phase.
Conclusion:
In summary, USOIL is undergoing a natural corrective phase within the broader bullish cycle, as depicted by the Elliott Wave structure. The market is still inside Wave C of Wave 2, and we expect further downside into the $80-$50 price range, where key Fibonacci support lies. Once this corrective phase concludes, we anticipate a bullish resumption with Wave 3, a powerful upward impulse.
This analysis gives a comprehensive outlook of the immediate and longer-term expectations for USOIL based on Elliott Wave theory, suggesting that traders should prepare for continued volatility with a potential bullish breakout in the months ahead.