It’s been roughly a month since the new Omicron variant emerged and threatened to bring back curbs to slow its spread. The initial impact on the price of crude oil was a dramatic decline to $62.23 on December 2nd. Yesterday, however, and despite new anti-COVID measures across Europe, WTI reached $77.15.
The good news is that traders didn’t have to pay attention to every COVID-related news article in order to predict crude oil’s rise. All they had to do was look at the hourly chart below through the lens of the Elliott Wave principle. In other words, almost all the losses caused by the Omicron scare have now been recouped.
The chart above was included in our December 20th premium analysis. It showed that the recovery from $62.23 to $73.13 was a five-wave impulse pattern, labeled i-ii-iii-iv-v. A three-wave correction follows every impulse before the trend can resume. This meant the following weakness was most likely a w-x-y retracement.
Elliott Wave Setup Helps Crude Oil Defy the Omicron Threat
Wave ‘y’ was supposed to breach the bottom of wave ‘w’ and complete the corrective phase of the cycle. Then it would make sense for another impulsive rally to occur and lift crude oil to a new high above $75 a barrel. The Elliott Wave picture really was that simple. The COVID picture – hardly so. Since we cannot predict the virus’ spread nor governments’ reactions, we decided to focus on the charts instead. Ten days later now, we have no regrets about that decision.
Wave ‘y’ ended at $66.04 the very same day. Crude oil then climbed in every single session during the next six days. On December 29th, the price reached $77.15 after what also appears to be an impulsive surge.
Initial analyses suggest Omicron is causing milder illness than previous variants, which is good news for everyone. Is this already discounted in the price of oil? Hard to tell, but the bigger Elliott Wave picture is already giving us a hint of what to expect next.