Oil's prospects can be very bullish, but also very bearish if these targets recently met becomes resistance

Crude oil had a distinct drop today. This, after meeting several interesting levels - one the symmetry target noted on my daily chart (at right); another a slightly higher symmetry target by measuring from the late 2008 low in WTIC; the .382 retracement also noted on my daily chart; and the 13-month moving average (see my monthly chart below). Oh, sure - also the underside of that broken channel trendline on my monthly chart!

It looks like the last leg up can be counted as 5 waves up, and StochRSI dropped although the slower-moving indicators haven't turned bearish (yet). Trendline support on the daily hasn't been breached, and it didn't even drop back under the .382 retrace level of $63.91. On the other hand, I cannot blame anyone who edged for the exit after oil met these levels with a potentially fully completed 5-wave pattern. After all, the indicators on the monthly chart haven't committed to looking bullish, either.

I've recently posted about some numbers that crude oil can reach if it's able to maintain support after any pullbacks (use "Oil" label to find those posts). That's why it seems premature to short oil, unless on the theory that the rally is over for fundamental reasons; or that it's done because the dollar finds support; or speculating that the levels I've pointed out will simply be too much for oil to surmount. In that case, an obvious place to place a stop loss on a short position would be at the highs it just saw.

On an Elliott Wave basis, I think it must be important to consider whether this rally has been just a "B" wave in a large zigzag. This depends on whether the drop from the all-time highs is a completed zigzag (which measures 5-3-5), or whether it's a 5-wave wave drop that has been followed by a 3-wave rally up. To interpret this rally as a 3-wave requires seeing the WTIC's lows in late February as a truncted 5th wave of the down-wave. The implications would be very bearish if this rally only completed a "B" wave.

If the drop from the all-time highs is a completed ABC zigzag, that would help support a much more bullish view. I have trouble seeing it as a completed ABC zigzag because I don't really see the shape of a "B" wave within the movement down into the late 2008 lows. I've included the weekly chart of WTIC below - in which you can also see that the 50-week moving average has just crossed under the 200-week moving average. That's considered a bearish cross on a daily chart. The indicators on the weekly chart haven't turned bearish yet. All in all, if you decide you are feeling bullish on oil still, then you should look for either the daily chart's trendline to hold, or for any pullback to remain orderly and not retrace more than 50% or 71% back to the lows. (Or exit and step aside, and either re-enter on a breakout back above the highs earlier this week or on what looks like a plausible breakout after an orderly pullback.) Certainly however anyone chooses to invest or trade - or not- in oil, is up to one's interests and style. Mainly I just want to point out that it looks like the prospects can be either bullish still, or conversely quite bearish.

There can be other Elliott Wave alternatives for oil, including a couple that would be bullish enough to propel it to new highs. I'm just reluctant to speculate too much on those unless and until oil can prove that the recent levels aren't resistance.