US Oil Forecast: Corrective Rally May Precede the Final Bearish Wave

Introduction

US Oil remains under strong bearish pressure after breaking below several key support levels. The recent decline has formed a clear impulsive structure, suggesting that sellers continue to dominate the market. However, Elliott Wave analysis indicates that the current sell-off may temporarily pause as the market prepares for a corrective rally before extending its broader downtrend.

The current outlook combines Elliott Wave, Fibonacci extensions, price structure, and Awesome Oscillator (AO) momentum analysis.

Elliott Wave Indicates Wave (iv) Correction

The daily chart suggests that US Oil is currently completing Wave (iii) of a larger bearish impulse.

After Wave (iii) finishes, price is expected to enter a corrective Wave (iv) consisting of an ABC structure.

The anticipated sequence is:

• Wave (a): Initial bullish recovery from current support.
• Wave (b): Temporary pullback.
• Wave (c): Final corrective rally toward the highlighted resistance area.

This recovery is viewed as a counter-trend correction rather than the beginning of a new bullish trend.

Swap Zone Becomes the Primary Sell Area

The highlighted orange resistance zone represents a significant technical barrier.

This area combines:

• Previous support that has turned into resistance (Swap Zone).
• Fibonacci 161.8% extension.
• Historical supply area.
• Expected completion zone for Elliott Wave (iv).

If bearish reversal patterns appear after price reaches this resistance zone, traders may look for opportunities to rejoin the dominant bearish trend.

Wave (v) Targets Fibonacci 261.8% Extension

Following the completion of Wave (iv), Elliott Wave theory suggests that Wave (v) should begin.

The projected downside target lies within the blue support zone, which aligns closely with the Fibonacci 261.8% extension.

This area represents the next major objective if selling momentum resumes.

Awesome Oscillator Signals Momentum Recovery

The Awesome Oscillator previously showed bearish convergence during the recent decline.

Momentum is now beginning to recover, supporting the expectation of a short-term corrective bounce.

However, traders should closely monitor the AO for a new bearish divergence as price approaches the resistance zone. Such a signal would strengthen the probability that Wave (iv) has completed and that Wave (v) is ready to begin.

Trading Outlook

In the short term, US Oil may continue forming a corrective ABC rally toward the highlighted swap zone.

If the market rejects this resistance and bearish momentum returns, the broader downtrend is expected to resume, targeting the Fibonacci 261.8% extension support zone.

Unless price breaks decisively above the highlighted resistance area, the overall technical structure continues to favour bearish continuation, with the corrective rally offering potential selling opportunities before the next impulsive decline.