Oil prices (NYMEX:CLX13) finally found a support and reversed sharply from the $101 low this week, in impulsive fashion, which can be start of a new larger leg up in this market. Keep in mind that decline from above $112 was in three waves, which in Elliott Wave Theory represents a corrective structure or pull-back in the middle of a larger trend, so bullish waves should not be a surprise. In fact, recent bounce from $101 low has unfolded impulsively, and we know that impulses (five wave patterns) occur in the direction of a current trend. So if that’s the case, then current “new trend” is now up.
OIL 4h Chart
On a daily chart of crude oil we can see qualities of an impulsive recovery since April 2013. Keep in mind that impulses are five wave patterns. Well, on the daily chart below we can see a pull-back from latest high, which looks likely fourth wave (red wave 4) ), in the middle of a larger five wave rise. So if that is the case, then we know that we need another leg up before five wave move can be finished.
If our bias is correct, then this reversal up on four hour chart can be start of a new rally in crude oil.
OIL Daily chart