Oil prices were sharply higher in recent weeks, gained well above $100 per barrel. Since this level was reached crowd become very bullish, someone are even calling $200 per barrel, but usually exactly the opposite reaction follows.
Technically speaking, we know that market is just in a corrective retrace, that reached 61.8% retracement level against the leg seen in 2008.
This Fibonacci level is very typical reversal zone for B) waves, and since we can count only three waves up from $33, we are very confident that recovery is just temporary and that bearish reversal will follow in months ahead.
As such, we must pay attention to lower time frames now where powerful impulsive decline from a top will confirm a bearish case!
Elliott Wave Financial Service
March 14, 2011