Many of you will remember that I had called for a sell-off in the price of Crude Oil from the $140 level to $50 in 2008. (see old posts in Wavetimes, especially how Fifth wave extensions can make you rich!). The main reason for my bearish call at that time was we had completed an extended 5th wave at $147. You are now seeing another such ‘magical moment’ when yet another extended 5th wave has been completed at $114.83. The new target for Oil is now just below $71, which means there is another 26% downside left.
As I never tire of repeating, nothing works like Elliott Wave analysis when it comes to the markets. The trouble is, one has to be alert to recognize the patterns as it is happening. For example, I could have warned you of the top if I was watching it every day. Still, it is not too late even here. If Crude gets back to above 104, we would have missed only about $10 of the move. There is still about $25 left even from current levels!
Is it possible that I am wrong? Of course, I could be wrong. But we are working with stops, aren’t we? If you can afford a stop of $3 and make $30 in the bargain, I call that a fair risk-to-reward ratio! In case you are thinking of taking a short position in Oil, I urge you to do the selling in stages. 104.30-70 is one level, but we also have 107 as the 61.8% pull back level. By leaving some room to add there you will be doing yourself a favor should the market decide to turn choppy. But the best way to add to your first position is when it starts moving in your favor. You might not catch the top doing that, but at least you would be trading with the trend! Good luck.
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Update on 29 August 2019:
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The recent sharp swings in Silver has caused consternation among traders and investors alike. What is the outlook for this metal?
In the last Elliott Wave Analysis of Silver, posted on 24th April, we saw a case made out for a test of the $50 level. It reached 49.51 and boy! whatever happened there is a trader’s nigtmare, especially if he was caught long! In just 4 days Silver has lost over 18%. Could this have been anticipated? What can we do from here? Where is Silver going in the medium term? These questions are uppermost in the minds of traders. Let us address them one by one.
If you were using Elliott Wave Analysis, then you would have had anticipated a top near the $50 level without too much trouble. (We had actually done that in this blog). However, I did not warn you that the top was already in for the short term because I am not watching Silver on a daily basis. Look at the first two charts shown here. When the extended fifth wave covered a distance equal to the distance travelled by waves 1-3, any serious trader would think of taking profits. What is more important is the fact that any correction that follows the completion of an extended fifth wave is expected to be BOTH sharp and deep. This phenomenon has been covered extensively in this blog (see Fifth wave extensions can make you RICH!).
What can Silver traders do from here? First of all, be prepared for a move down to the $34 level. That level is the 2nd wave of the extended fifth. Will we get there directly? This is not so easy to answer, but there are supports at 40.10 and 39.70. There is a reasonably good chance for a bounce from either of these levels, but lookout for selling to emerge again around 44.60. Only above 45.60 will I breathe easy if I was caught long above 49! Yes, it is that serious, buddy.There is always some hope that we will get the so-called 2nd retracement of the extended fifth wave, a move that can take us back to the top of the move before a collapse happens. But we cannot rest on hope. We need to manage any open positions with care. So keep an eye on the resistances mentioned above.
What is the medium term outlook for Silver? As I said before, I am currently working on the paradigm that we have just finished the 3rd wave, and the anticipated dip to $34 area will be the fourth wave. Once that correction is finished, we should look for a fresh move higher. That rally might run out of steam near the $50 again if there are not enough reasons for the commodity run to carry on. This blog will surely update you on how to trade that rally when it starts. For the time being, though, let us concentrate of navigating the down move to $34 without getting killed.
Update on 29 August 2019:
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