The surge to $71.95 on Sept. 16 has almost reversed the preceding downtrend from the April 25 high of $75.60.
This dramatic rally, although driven by news and typically classified as market noise, helped in altering the bearish course.
Due to this strong rally, waves were relabelled. Oil seems to be riding on a wave (c) from $55.88.
This wave may end around either $71.74 or $81.55, its 61.8pc and $100pc projection levels respectively.
Indeed, oil fell deeply after briefly piercing above $71.74. However, compared with the wave (a), the wave (c) looks too short to be complete, in terms of length or duration.
The current speculation is the wave (c) may consist of three smaller waves. The second wave labelled b may be ending around a support at $63.96, the 38.2pc retracement of the uptrend from $27.10 to $86.74.
This wave b will be totally reversed by an upward wave c.
This set of retracements well define the medium-term ranges for both the wave (a) and the wave (b).
The wave (c) also observes closely the 23.6pc level of $72.66 and the 38.2pc level of $63.96.
There is a good reason to believe that oil may be confined within the range of $63.96-$72.66 over the next few weeks, until it accumulates enough momentum to clear the zone of $71.74-$72.66.
These waves, when put under a much longer period, are classified as parts of a much big wave C, which is the third wave of a long-term uptrend from $27.10.
A projection analysis on this wave reveals a resistance at $72.71 and a target at $86.79, respectively the 38.2pc and the 61.8pc levels.
The current bullish outlook is fragilely based on a pivotal support at $63.96, a break below which could make the target range of $71.74-$72.66 temporarily invalid. A bearish target at $56.92 will be established accordingly.
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Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own.
No information in this analysis should be considered as being business, financial or legal advice.
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