Brent Crude: Wave 3 Looks Close to Done
Quick overview
Bias: Bullish, but I'm expecting a pullback first
Structure: ABC correction complete, impulse wave in progress
Target: $130
Invalidation: $96.60
Where we are
Looking back at this year, Brent's move from March through to July looks like a finished ABC correction. Wave (a) found a low in April, wave (b) pushed back up towards $120 in May, and wave (c) took price down to around $70 by early July.
From that July low, the move up has been impulsive. Wave 1 ran to $96.60, wave 2 pulled back to around $79, and we've been in wave 3 ever since. Within wave 3, I can count five smaller waves. Price is now pushing into the $116 to $118 area in what looks like the last of them.
Why I'm expecting a pullback
ROC is diverging. Price has made a new high, but the 10-period ROC is at 6.6. At the September high it was closer to 20. That tells me the buying is losing steam.
The May high near $120 sits just above. I don't see much room left before price stalls.
The trend itself is fine. Price is above both the 20 and 50-day EMAs and both are still rising. So this looks like a pause, not a top.
The plan
I'm looking for wave 4 to pull price back towards $105 to $110, where the EMAs and the September high could offer support. From there, wave 5 could take Brent on to $130.
On the fundamental side, nothing has changed my view. Houthi strikes on Saudi energy sites sent December Brent to $116.72 last week, its highest since April, and US crude stocks are still about 3% below their five-year average.
What breaks it
Wave 4 can't overlap wave 1. If price falls back below $96.60, the count is wrong and I'm out.
For now, I'm not chasing. I'm waiting for the pullback.
Disclaimer: This post reflects my personal analysis and is for educational purposes only. It is not financial advice. Trading involves risk, so please do your own research before making any decisions.
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