The world was hoping that the biggest oil producers were going to reach an agreement to freeze output during their meeting in Doha on Sunday, April 17th. They did not, since Saudi Arabia insisted on all OPEC members taking part in the agreement. When the oil market opened with a huge bearish gap on Monday, April 18th, experts and mainstream media immediately pointed out the freeze talks failure as a reason for it. We are not going to argue. But soon after the opening on Monday, the price of oil began steadily rising and eventually climbed to a new multi-month high near 44.40 so far. The explanation, which followed, was that a labor strike in Kuwait, OPEC’s fourth largest member, was still in effect. So, it follows that unless you are Nostradamus, who can prophesy any event, it is impossible to predict oil’s violent price swings, since they are caused by the news coming from OPEC members. Fine. Now, take a look at the following chart on Monday, April 18th.(some of the marks have been removed for this article)
As visible, the Elliott Wave Principle suggested we could expect a recovery, but we insisted on waiting for the upper line of the wave (b) corrective channel to be broken before going long, because we thought that “wave (b) is not over yet and it is probably going to extend into a larger corrective pattern”. In addition to this comment, our premium clients have been told that “entries in the area between the 38.2% and the 61.8% retracement levels would be better.” We thought crude oil was supposed to extend lower, before resuming the uptrend, because wave (b) was too shallow in respect to the wave it was retracing. Now, let’s take a look at the price of crude oil as it is today.
As expected, due to the Doha failure or not, wave (b) did extend lower right away. Prices fell precisely to the 61.8% Fibonacci level on Monday, where they found support and bounced back up. The Elliott Wave principle not only warned us about the upcoming weakness, but also provided us with a hint about what to do with it, in order to take advantage of the next big move in prices. We could not have known that the Doha meeting was going to be a failure, nor did we know the labor strike in Kuwait was going to continue. And, fortunately, we did not need to know all that, because the information we really needed could be found on the charts. And you do not have to be a fortune-teller to be able to read the charts. Being an Elliott Wave analyst is usually enough.