Interesting sequence of posts on oil show the power of EW

The "investing" (gambling) world is filled with people making stock price predictions.  None of them have any clue as to what comes next and they are most wrong near the major turns.  When prices are up, they predict that tress will reach the sky.  When prices have crashed, they predict that the Earth will open up and swallow us all.  The louder they get either on the confidence side or the fear side, the more likely that a reversal is near.

But that leaves a heck of a lot of open ground.  In order to narrow it down greatly, I use Elliott Waves.  Below is a recent case study consisting of sequential posts on USO, the oil ETF.  Not all of my results are always this good but some in fact have been much better.  It's all here in my blog for anyone who cares to see.

I clearly called nearly the exact 2014 peak in oil.

I then went dark on it with no posts until this one indicating that we still had downside but that it would not go down forever.  In other words, start planning your buying but certainly not yet ready to pull the trigger.

Late December was my subsequent post on USO and while I modeled it was still not done yet I zoomed in and stopped talking in generalities.  A precise wave count was provided.  The presence of a triangle clued me into the fact that a 4th wave had just played out.

The next post was 3 days later where I provided my first actual bottoming target of $19.50.

Since we were heading into the very final waves of the bottoming model, I began to post more frequently.  New Year's eve I provided this post with waves to look for.  Of course that goes either way - if you don't see those waves you know the model needs adjustment.

The next refinement, target still $19.50.

The next refinement.  Even though $19.50 had not been hit yet, the model indicated a lower finish was likely, now targeting $18.  No buy recommendation had ever been issued up until this point all the way from the time I modeled that it should be sold in early 2014.

The next post suggested that the bottom was in after having spiked down to only 19.70. That prove to be a headfake.

The next post indicated a bottom in the low $18 range but could go as low as $17.80.  Significant volume on the prior 3rd wave was telling me that capitulation selling was ending.

Of course, I wanted to play this with leverage so I also posted several times on RUSL regarding near term support and resistance levels like this post.  breakout potential. 

I called a breakout on RUSL @$16.43 which turned out to be a small head fake but I was only off by one small wave.  Still a stop loss value was provided.

I then modeled a massive breakout for RUSL which was followed almost exactly by the chart.  Today's close was $20.25.


The most recent post was a warning to look out for resistance at the top rail of a falling parallel line.  But not a sell signal of any kind, just something to pay attention to.

So that is the high level history of where I have been with USO and RUSL.  I am still not 100% sure that a sustainable bottom is in.  You need 5 waves up for that and we are still playing with sideways chop on USO.  So the warning provided above still stands as you can see from today's chart below.

At the same time,those lines represent traditional TA channel lines and the chart tries to be tricky near the big turns.  So after selling the 18% pop this AM, I bought back into it near the close because I have a wave count shown below that suggests the full 5 waves could be in.  Of course, a lower low than $18 would indicate that the top rail kiss was really only a 4th wave and that one more full size wave down into the 16s is likely.

In fact, this needs to almost gap up and out of the orange channel darn near at the open or it would be a potential sell indication if not an outright sell signal.

So I hope you see the methodology here.  Again, I don't know what the herd will do in the future but I can say what it is likely to do and I can tell that it has chosen a different path pretty quickly so that small mistakes remain small.  This is the value of Elliott waves to the stock market gambler.  I don't know of any other technical analysis that provides this level of a tight feedback indicator.

While I'm here I also want to show this RUSL chart which is similar to one I showed before.  In short, RUSL has put in an inclining double bottom after what could easily be counted as 5 waves down from $140.  The lower rail of the falling wedge is the next resistance level.

Zooming in, the first step toward breaking out will be to move up one more time into black 1 as shown to kiss the orange rail from below but not break out of it.  Then a pullback into wave to for a running start at the orange line and finally a gap up during 3 of 3 in order to break out.  If this is going to break out it will take the power of a 3rd wave to do it.  So a really good way to play this if you aren't already in it would be to see if black 1 plays out and black 2 as well.  IF they do then the odds are very high that black 3 will too and odds are all you are ever going to get when gambling.