USOIL on the Verge of Major Drop: Bearish Elliott Wave Setup Elliott Wave Structure:
The chart clearly displays a five-wave structure (labeled as (i), (ii), (iii), (iv), (v)) according to Elliott Wave theory, which implies a potential correction after a completed impulse wave.
Current Position: The chart suggests that the price is completing a corrective structure in a Wave (ii) of a larger degree cycle, with the next anticipated move being the formation of Wave (iii), signaling the beginning of another impulsive leg down.
The larger Elliott Wave cycle has been broken down into smaller waves (labeled as w, x, y), showing internal wave subdivisions, confirming the corrective patterns.
Bearish Order Block:
There is a Bearish Order Block labeled in the upper region of the chart, which marks an area of institutional supply where price is expected to reverse after a retracement.
This area is important because it aligns with the completion of the smaller wave (ii), implying that once price reaches this zone, a rejection could occur leading to a potential downside move into Wave (iii).
Break of Structure (BOS) & Market Structure Shift (MSB):
A BOS/MSB is highlighted on the chart. It represents a key level where the previous bullish structure was broken, signaling a shift in market sentiment from bullish to bearish.
The MSB (Market Structure Break) has occurred after the price broke below the recent swing lows, indicating that a bearish trend is likely to continue.
Fibonacci Extensions:
Fibonacci extension levels (2.618 and 2.786) are drawn to the downside, showing potential price targets for the next leg down (Wave (iii)).
These levels suggest that the price could extend downwards to the $56.05 and $55.03 regions, which correspond to deeper Fibonacci targets, once the corrective Wave (ii) is complete.
Invalidation Point:
An invalidation point is marked in the upper region of the chart, indicating that if the price exceeds this level, the current bearish wave count (and the expectation for a continuation of Wave (iii)) will be invalidated. This serves as a critical level for traders to watch, as price exceeding this level would suggest the current analysis is wrong, and a new outlook may be required.
Current Weak Low of a Range (Legs in Leg 1):
There is a current weak low labeled, highlighting the price range low where price is likely forming its corrective pattern (wave (ii)).
This weak low signifies that while price is hovering in this range, it is likely setting up for the next leg down, which would confirm the start of wave (iii).
Projection for the Future (Late October):
The timeline on the chart projects into late October 2024, indicating the anticipated completion of a downward 5-wave structure. This projection aligns with the potential completion of Wave (iii), (iv), and (v) movements.
The chart suggests that wave (v) might complete by the end of October, with a significant price move occurring by then.
Wave Count Levels:
The labeling of (i), (ii), (iii), (iv), (v) at multiple degrees shows the breakdown of both large and small wave structures, giving a comprehensive view of the current cycle's progression. The internal subdivisions (marked in purple) help in understanding the minor corrective moves happening within the larger wave count.
Market Timing:
A vertical purple line is drawn on the chart, which might represent a key time-based element, possibly indicating a specific date or price action zone where a significant market reaction is expected.
The chart shows critical points in time (e.g., October 3rd), where traders should pay attention to how price behaves as it reaches important structural levels.
Potential Trade Plan:
Short Bias: The analysis suggests a short setup, with price expected to move lower after completing the retracement in Wave (ii).
Entry Point: The optimal entry for shorts would likely be near the Bearish Order Block, where Wave (ii) is expected to terminate.
Targets: The price targets are the Fibonacci extension levels around $56 and $55, which align with the projected completion of Wave (iii) and subsequent waves.
Invalidation: If the price exceeds the invalidation point, traders should reconsider the trade as it would invalidate the current bearish wave structure.
Summary for Traders:
The chart suggests that USOIL is currently in a corrective phase (Wave (ii)), with expectations of a bearish continuation into Wave (iii).
Key Levels to Watch:
Bearish order block for potential short entries.
BOS/MSB level for confirmation of the downtrend continuation.
Fibonacci extension levels ($56.05, $55.03) for potential downside targets.
Invalidation point above to signal when the bearish scenario is invalidated.
Trade Strategy:
Wait for price to retrace into the Bearish Order Block.
Short positions can be considered with targets towards $56 and $55 based on the completion of Wave (iii).
