In our previous two posts, we’ve discussed Crude Oil and Brent Oil, two popular commodities for retail and professional traders alike. In this third and final part, we’ll review the Gasoline RBOB, probably very uncommon and unpopular to many traders, but it does not mean it is not essential.
Understanding the Gasoline
Keeping an eye on Gasoline’s price action is wise because of its positive correlation with Crude and Brent oil. Also, RBOB acts as a leading indicator of Crude Oil (or USOil) and Brent Oil (UKOil). In the chart, we observe the positive correlation between the three energy group commodities.
The fifth of the Fifth Wave?
The Gasoline daily chart could look confusing, because the bullish cycle is vertical, with high momentum. Even it can make us feel uncomfortable to analyse and finally let behind. However, we support our analysis using different Elliott Wave tools.
The bullish cycle started in December 2018 when the price touched the 1.2450 level. The daily structure suggests that Gasoline is developing a fifth extended wave (yellow ellipse). At the same time, RBOB’s price is running in the fifth of the fifth wave (blue ellipse).
The 4-hour chart
Price action on the 4-hour chart looks more evident than on the daily chart. On this chart, we appreciate that the rally in the energy group may end soon. Pay attention to the blue ellipses; the first wave made a bullish gap. The second ellipse completed five bullish waves. Now, observe, after its corrective move (red arrow) the price started a new bullish cycle which has already made four waves. Again we can see the alternation rule in the last corrective waves.
On the one hour chart, we observe price is running on its third wave of a lesser degree; although the price still has not reached 100% of equal waves. We anticipate that Gasoline RBOB should make a new higher high; the potential target area is between 2.1023 and 2.1471. The confluence zone and the upper line of the ascending channel make us think on a vertical ascending move which could be the end of the bullish cycle in the energy group. The invalidation level of the last bullish cycle is 1.9934.
Remember that the price is not bound to move our forecast says. Charts released corresponds to an Elliott Wave Theory application.