Was that bounce in USO's hourly chart Friday enough to jump-start a rally in crude oil?

Oil made an interesting movement in its hourly chart on Friday, by poking a slight new low and then making a higher high (in the hourly chart) on big volume. Did it jump-start a rally? Now first - if you're getting as sick as I am, of trying to figure out whether oil might finally be ready to be "on the move," then perhaps sentiment is about where it needs to be. But let's take a look. From an Elliott Wave perspective, oil may have completed a diagonal move down signifying that it's reached an important support level. The monthly chart shows it snagged the 200-month moving average but remains above that level, so that can be very important support.

On the daily charts, RSI positive divergence has continues to build (it's been doing so for some months now). Interestingly for Elliott Wave analysts, the WTIC chart doesn't show the same new low poked when USO went down on Friday. Maybe it completed an Elliott Wave diagonal down in USO with a truncation in the WTIC chart (or maybe it only completed a B wave down so we'll have to see what any bounce looks like). It's also possible that this difference is a timing diffference between the ETF-traded USO and the futures contracts, that may be cleared up on Monday.

Where might oil go from here, if it's ready (finally) to move up? Oil did overlap the 2000/2001 highs, without looking like it's in a huge wedge, so it doesn't look like a large Elliott Wave diagonal upward that could still point to new highs. Maybe those analysts who say oil completed its all-time high are right. In which case the 2000/2001 highs might have been a large triangle D-wave, followed by its E-wave down and the move up into last year being a large Wave V peak completion. Implying from the Elliott Wave perspective that the game in oil is over, and any move up would only be corrective, and not leading to new highs.

Unless of course, that peak last year was a large fifth wave that completed an even larger Wave (I) and oil bottomed a big Wave (II) so we should look for a monstrous Wave (III) up - does anyone really believe that?

Operating off the assumption that oil crashed in wave 1 or A of its move down off the all-time highs, that means that when it's ready, it probably traces up a big wave 2 or wave B up. I think I'll vote for the B-wave idea, given the depth of the fall already. A wave B would be nice because it commonly would get to a 50% retrace to the highs, although it would likely be a choppy journey rather than a nice impulsive ride. If we do see something more impulsive, then we can start talking about a monstrous Wave (III) up, but let's hold off on that for now.

Now, I'll be the first to say, it's a bit early to get excited! If crude oil actually did hit major support on Friday, its initial reaction will confirm that not only on the hourly charts but soon on the daily charts. For that matter, the pattern in the hourly chart is very preliminary. So we need to see whether or not a trend reversal pattern can finish tracing out in USO's hourly chart. We'll know if it stays above the support lines I've drawn on that USO chart (see below), and then starts making higher highs.

Here are the charts. First, the USO hourly chart, on which I've marked those support levels that need to be respected if the pattern is to be a trap door or similar reversal pattern leading oil up. Next, the WTIC daily and monthly charts: