The Crude oil price reacts, blows up, and freaks out. It breathes through wars, grows with the world economy, and falls apart when traders are scared. It has always been at the centre of global stories, from the tensions between the US and Iran to geopolitical shocks across the Middle East.
But there is order beneath all this chaos. The calm in Crude oil is over with the end of the second wave; what comes next isn’t a drift, it’s the beginning of a storm that could redefine price levels with the third wave.
In fact, it could be argued that you probably are not ready for what’s coming next.
The 1998–2008 Supercycle: Lessons from Wave (I)
When you look at WTI Crude Oil over three decade, you can see an interesting pattern. The rise from $11 in 1998 to the peak of $147 in 2008 wasn’t random; it was a classic Elliott Wave Supercycle (I).
A strong expansion fuelled by globalisation, rising demand, and optimism about the economy.
Then came the fall.
The 12-Year Bear Market: Why Wave (II) is Finally Over
From 2008 to 2020, crude didn’t just go down; it also made the market feel bad. This wasn’t just a small dip. It was a Supercycle Wave (II) full of false hopes, lower highs, and breakdowns that happened over and over.
A global panic in 2020 saw every asset class trending downward. The oil prices went into negative territory but manage to close higher. It marked the end of a bearish Supercycle.
The Rally That No One Believed
Crude oil rose from the ashes of 2020 and exploded. The rally was sharp, aggressive, and powerful, going from $0 to $130 by 2022. This rally fits perfectly with what Elliott Wave theory calls Wave (1) of a new bullish cycle.
But markets never go in a straight line. The correction that came next, which brought the price down to the $55-60 range, was just as important as it wasn’t destruction. It was a structure.
A textbook Wave (2).
A correction that follows Fibonacci rules, breaks your heart, and tests your patience.
And then came the phase that made traders lose their minds…
2023–2026: The Time That Tests Your Patience
If you have traded crude oil in the past few years, you know how this feels:
- Breakouts are not working
- Trends that don’t last
- Quick trend change… then confusion
The market seems to have lost its way. But let me tell you, the price is still going in the right direction. What you are seeing is not random. It is a Volatility Contraction Zone (VCP), which is a planned and structured time when the market is getting ready for its next move.
Volatility Contraction Zone: The Silent Setup
The price action from 2023 to 2026 appears as a Volatility Contraction Zone forming inside Wave (ii).
This is important because most traders think Wave (ii) will be sharp and painful. But in commodities, Wave (ii) often takes a long time instead of lowering prices.
The market retraced with price and time as it:
- Moves in a falling channel
- Forms lower highs
- Has a steady base
- Reduces volatility
This isn’t a sign of weakness. This is absorption. Strong hands push out weak hands.
And the market gets ready.
The Trap of Psychology
In a Volatility Contraction Zone:
- Retail traders get bored
- Traders who are in a position lose faith
- Traders who trades breakout get stuck
The story changes from:
“Crude is bullish”
to
“Crude is stuck in a range”
and finally the
“Crude is dead.”
That’s when the market gets ready to move. Because trends don’t start when everyone believes. They start when faith is gone.
The Falling Channel Breakout: A Signal, Not Noise
During corrective phases, channels act like boxes. They keep prices stable, reduce volatility, and give traders a false sense of control. But once the price breaks out… It’s not just a breakout. It’s a trend change.
A change from:
- Contraction to Expansion
- Doubt to Momentum
- Silence to Acceleration
This breakout is not the end of the consolidation. It is the start of growth.
Wave (3): The Most Traded Wave
If this structure stays the same, crude oil is now in Wave (3).
And let’s be very clear, Wave (3) is where traders make money. Not in guessing bottoms. Not in catching reversals. But in riding the wave.
Based on Fibonacci’s predictions:
- 161.8% extension points to $155
- Moves that last longer could reach $200 to $220.
Yes… Crude oil could cost $200. Sounds crazy?
The Macro Trigger: The US, Iran, and the War Premium
Let’s not forget about reality. Crude oil is a valuable asset in the world of politics. The “war premium” is made up of things like tensions between the US and Iran, problems with supplies, OPEC decisions and wars around the world.
When things get unclear:
- Fears about supply grow
- Speculation goes up
- Prices go up quickly
And here’s where it gets dangerous.
These moves don’t let you get in. They run, spike, and gap. If Wave (3) lines up with geopolitical triggers… You won’t get the time to think.
The Risk
If oil breaks and stays below $55, then this whole bullish structure starts to fall apart. It means:
- A longer time to fix things
- A cycle that is late
- Or a structure that is more complicated
No matter how strong the story is… Bhav Bhagwan Che (Price is always the last word).
Price Targets: Why $120 is Just the Beginning
This is not the right time to guess. Now is the time to get ready.
Traders who are smart:
- Follow the structure, not the headlines
- Don’t be afraid of consolidation; respect it.
- Position during doubt, not excitement
Because when crude oil reaches $120… The story will be obvious. The opportunity will be missed…
Crude oil, which was once thought to be weak because of low prices, is now strong. And just like every big trend in the past… Most traders won’t see it coming when it starts.
Are you keeping an eye on crude oil? Or will you go after it later?
Disclaimer:
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Brijesh Bhatia is an Independent Research Analyst and is engaged in offering research and recommendation services with SEBI RA Number – INH000022075. He has two decades of experience in India’s financial markets as a trader and technical analyst.
Disclosure: The writer and his dependents do not hold the stocks discussed here.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives and resources, and only after consulting such independent advisors if necessary.