Elliott Wave Outlook For BP

Note: This article was originally published on the Wavetimes Blog on 4 May 2010, and is linked to my book “Five Waves to Financial Freedom.”

The following analysis gives the Elliott Wave outlook for BP. It was initially published in the first week of May 2010. However, I have rewritten the entire article to discuss the perils of relying solely on fundamental analysis.

Today, I came across a report in which an analyst called for BP to reach 730 pence from its current level of around 575.50. However, from an Elliott Wave perspective, the outlook for BP doesn't look so rosy. I am of the view that we are headed a lot lower. Take a look at these two charts. The first chart on BP shows that wave 3 was extended, being 3.618 times wave 1.

We also see that wave 4 was an irregular correction, which follows the Elliott guideline of alternation. The 2nd chart confirms that the 5-wave progression was finished around 722, so a full-blown correction was due anyway. Wave A of the anticipated 3-step correction was completed, and we also got a wave B before the oil spill news hit the market. So we have probably embarked on wave C, which has targets at 310.

Update: 7 May 2010: Someone asked me about the 5-year time frame for the correction. Remember that time runs from the top of wave 5 (at 722) and not just for wave C. As that top was posted in early 2006, the correction will last at least till early 2011. This has been explained in my Elliott Wave book, "Five Waves to Financial Freedom."