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Impulsive Price Action Could Be on Tap for the US Oil Exchange Traded Fund
The 2011-2012 sell off in natural gas is why Elliott third waves are "wonders to behold."

By Nico Isaac
Wed, 13 Mar 2013 17:30:00 ET
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The Elliott Wave Principle says that the dominant price trend unfolds in 5 wave patterns:  

In wave 1, the trend has begun. Wave 2 makes a sucker outta you. Wave 3 is a powerful sight to see. Wave 4 is a corrective chore. And wave 5 is time to look alive -- once more.
 
My personal favorite – along with most Elliotticians – is the third wave. If waves were like people, third waves would be like the world's fastest man, Olympic gold medalist Usain Bolt.
 
Here, Elliott Wave Principle -- Key to Market Behavior (the ultimate resource for all things Elliott) provides this definition:
 
“Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Increasingly favorable fundamentals enter the picture as confidence returns…
 
AND: “It follows, of course, that the third wave of a third wave and so on will be the most volatile point of strength in any wave sequence. Such points invariably produce breakouts… and runaway price movement.”
 
To witness a wave 3 in action is “a powerful sight to see.” The first chart below of natural gas comes from EWI's January 2011 Global Market Perspective. It showed prices gearing up for a third-of-a-third wave decline to $2 -- a level the market had not seen in over a decade.  
 
 
 
The 2nd chart moves ahead to mid-2012. It comes from the Oct. 10 Energy Specialty Service's daily analysis of natural gas AND shows exactly how prices followed their Elliott third wave script to a T -- as in a 60%, 16-month long TUMBLE.  
 
 
 
And now for the best part: You've seen an example of the wonder of 3rd waves in the PAST price action of a major energy market. Now, the March 13 Energy Specialty Service's daily analysis of the US Oil Fund ETF shows the potential set-up of a third wave move.
 



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