Elliot Wave Theory

Elliott Wave Theory is a form of technical analysis that proposes financial markets move in repeating wave patterns driven by collective investor psychology. According to the theory, price movements unfold in a sequence of impulsive waves in the direction of the main trend, followed by corrective waves against it. In energy markets, Elliott Wave analysis is sometimes applied to highly volatile instruments such as crude oil or natural gas futures to interpret market structure and potential turning points. Practitioners attempt to identify where a market sits within a broader wave cycle to anticipate trend continuation or reversal. While Elliott Wave Theory can provide a framework for understanding sentiment and momentum, it is often criticised for its subjectivity, as wave counts can vary between analysts. As a result, energy traders who use Elliott Wave analysis typically combine it with fundamentals, positioning data, and other technical tools. The theory is most often used for timing rather than for determining long-term value.