WTI Crude Oil is Preparing a New Leg Up to $120

2022.12.14 09:23

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• WTI is correcting the strong move up since April 2020
• From this point, WTI has more upward than downward potential
• WTI is preparing a new leg up to $120

Primary trend

A trading range becomes visible on the primary trend, with the $20 level at the bottom and 130-140 at the top. The demand and supply zone is where buyers and sellers with a long-term focus are located. It is likely that will move back and forth in this broad range in the coming years.

Within the range, WTI has rounded off the surge through 2008 with a corrective downward move to the downside through an ABCDE pattern.

WTI oil – primary copattern.

After a completed movement, you can expect a movement in the opposite direction. This is what WTI has been working on since April 2020. Because a movement rarely stands alone, you can expect a corrective pattern in the form of an ABC up or a trend movement in the form of a 12345.

The chart above shows the possibilities based on this. From the bottom in April 2020, WTI has rounded up a 1 or an A and is now moving down a 2 or a B. If this B or 2 is rounded down, there will be another move back up to the top of the range.

Intermediate trend

The downward correction on the upward movement from April 2020 is visible on the intermediate trend. Here too, a movement like this rarely stands alone and will show something in the form of an ABC pattern.

Crude oil immediate pattern.

Most likely, we are dealing with a first move down here, an A down. When this is completed, a B goes up, and then a C goes down to complete the correction pattern. With that, the 2 or the B (as mentioned earlier) is completed, and WTI can move towards 120-130 with the 3 or C. 

On the move up, a demand zone has been created, as shown in the picture, and buyers will likely come back into the market here. A move will likely be completed in or around this zone.

Side note: a correction pattern never literally follows a pattern as I have drawn here. It is, therefore, important to follow the movement of the minor trend to experience how it actually develops.

Minor Trend

The minor trend shows the movement down in more detail. As long as the movement shows lower tops and lower bottoms, it is still valid. You can recognize the end of a move by the fact that a top is taken out. See the blue arrows in the image for this.

Conclusion

Because WTI started an upward movement on the primary trend from the bottom in April 2020, and this movement is now undergoing a correction close to the demand zone, there is more upside than downside potential for the medium term.

Potential down will only arise if the demand zone at the bottom is removed. However, this is the least likely scenario in this type of situation.

It is safest to always wait for the signal that a movement has been completed before entering the market. In addition, it must be considered that the next movement may be a B up, followed by another C down, before the actual subsequent movement up starts.

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