Oil – Monthly Review
Oil closed September with a red candle—very much in line with our expectations. But does this alone spell defeat for the bulls, or do they still have a credible path forward? In today’s update, we’ll interpret the multi-frame signals, weigh the recent candle patterns against key technical levels, and map the most probable paths from here, including the conditions that could revive the bullish case or confirm a deeper pullback. Let’s lay out the scenarios and their probabilities with a clear risk framework.
CANDLES
On September 30, oil closed the monthly frame with a red candle. While it could be a bearish continuation, certain technicals suggest it could end up as an Inside candle, potentially leading to a bounce. The quarterly closure was similar and oil is technically closer to neutral long term.
At the same time, the 15D and smaller frames closed with predominantly bearish signals, signaling better odds for oil to continue losing value in the short- and mid-term span. The first day of October did not bring surprises – oil remained bearish short term.
8/20 EMA Quarterly Cross
(from the Jul 18 analysis, refreshed chart)
As we flagged in mid-July, oil was on track for a rare technical bearish event. On September 30, the 8/20 quarterly EMA bearish cross was officially recorded. It has occurred only five times before, and all previous instances led to major declines ranging from 36% to 70%, with an average drawdown of 53%. If history rhymes, the statistical target for this move falls within the marked rectangle, with the average pointing to around $33. This suggests the bear market in oil may persist for another 1–2 years.
It is also worth noting that the 50/100 quarterly MAs are about to flip bearish. There is no record of previous occurrences, but this one will likely reinforce the long-term bearish odds.
ELLIOTT WAVES
Last Wave
Some technicals started to signal that wave three of some degree is underway.
Micro Wave
At the micro level, there is a fair chance that wave iii (blue) is still developing, although there is also a possibility that the first sizeable impulse down, marked in red, is about to complete.
Classical Patterns – Flags
Summary:
Oil is bearish across the short- and mid-term frames. The monthly and quarterly closures were red, though I’d hesitate to call the candles strongly bearish—closer to neutral. Several rare technical signals point to a potentially very long bear market for the commodity. It will have its ups and downs, but the primary direction has good chances to remain downward for several quarters or even years.
Happy Trading!
