S-T Bull Divergence Stems Crude Oil Break, But Premature to Conclude Correction's End

July 26, 2018 7:15AM CDT

Yesterday's resumed pop above Mon's 69.31 initial counter-trend high confirms a bullish divergence in momentum that defines 18-Jul's 66.29 low as the end of a 5-wave Elliott sequence down from 03-Jul's 75.27 high as labeled in the 240-min chart below. Furthermore, this resumed recovery leaves Tue's 67.56 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to break this intermediate-term uptrend, render the recovery from 66.29 a 3-wave and thus corrective affair and re-expose the first-half of Jul's downtrend. Per such that 67.56 low is considered our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.
Crude Oil 240 Min Chart
Crude Oil Daily Chart

Taking a step back however, the:

  • • extent and impulsiveness of Jul's sell-off
  • • waning upside momentum on a weekly basis below and
  • • still-historically-frothy levels in our RJO Bullish Sentiment Index

warn of a broader peak/reversal-threat environment that requires a recovery above 03-Jul's key 75.27 high and long-term risk parameter to negate. Against this broader peak/reversal-threat backdrop and process this current recovery attempt may only be a (B- or 2nd-Wave) correction and an eventual favorable risk/reward selling opportunity.

These issues considered, shorter-term traders are advised to move to a neutral/sideline policy to circumvent the heights unknown of a steeper correction or reversal higher. Weakness below 67.56 is required to threaten this interim bullish count and re-expose a broader bearish one. Long-term players are OK to pare bearish exposure to more conservative levels with a recovery above 03-Jul's key 75.27 high and long-term risk parameter still required to nullify a broader peak/reversal count and a bearish policy. Further lateral-to-higher prices are anticipated in the days/week ahead.

Crude Oil Weekly Chart

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