Bottom line:  WTI Crude bearish reversal remains intact until prices stay below the 65.62 levels. A counter trend rally remains high probability from here.

Technical Analysis:

WTI Crude completes its first bearish leg that had begun from 65.62 levels just below 50.00 mark today. Please note that price support around 50.60 has now been taken off and bears seem to have registered themselves aggressively. Ideally a counter trend rally is expected to materialize from current levels (49.50/50.00) to push towards 59.50 levels at least. Looking at the recent drop from 65.62, WTI Crude has dropped in 5 waves. This can be marked as a lower degree Wave 1, within Wave (3) of a higher degree that resumed lower from 65.62 earlier. A 5 wave drop should be followed by a 3 wave corrective rally that could end up towards 59.50. This is also fibonacci 0.618 resistance of the previous drop 65.62 through 49.88. The larger wave structure also indicates that Wave (3) might have resumed from 65.62 levels. WTI Crude has produced a 5-3 wave structure since 76.88 highs earlier. Ideally, a 5-3 wave structure is followed by another 5 waves towards the major trend which is lower in this case. The drop between 76.88 and 42.40 was in 5 waves labelled as Wave (1), followed by a corrective rally towards 65.62 labelled as Wave (2). If these large degree counts are correct, WTI Crude stays below 65.62 and push towards 42.40, as Wave (3) progresses. Trading point of view it could be safe to take profits on short positions taken earlier around current price (50.20/30) and remain flat. If Wave (3) has resumed from 65.62 levels, any counter trend rally should be well capped below 65.62 going forward. Allow for a pullback rally to materialize towards 59.50 to initiate short positions again.

Prepared by

Harsh Japee, Technical Analyst.

WTI Crude Chart

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