Oil Higher Low (D)
Created on Tuesday, 28 July 2015 02:20
Written by Austin Galt
Oil looks to have finally made its higher low today at $46.68 so let’s check out the action using the daily chart.
OIL DAILY CHART
We can see today’s candle was a bullish outside reversal candle. Price will obviously need to follow through to the upside while breaking down below today’s low now would look very bearish and signify a test of the lows is dead ahead.
I have drawn a horizontal line denoting the April 2015 low at $47.05 and previously I stated a break below here would likely see the yearly lows tested. Price has clipped this level but since it reversed back up immediately I am giving it the benefit of the doubt. Importantly, price did not make a close beneath this level.
I have added Fibonacci retracement levels of the move up from yearly low to current yearly high. This low was right around support from the 76.4% level. The first correction in a new bull trend often makes a deep retracement so we have to consider that this may indeed be the final low before the next big bull trend takes place.
Previously, I stated my expectation that price would test this year’s low next year and that is still my expectation. However, considering price has already made a deep retracement I have to leave open the option that this is the major higher low. I expect more trading to provide more clarity on this issue.
I have drawn a Fibonacci Fan which shows this low right around support from the 88.6% angle which is commonly found at major higher lows.
The RSI is well oversold and has clipped the recent low so no bullish divergence but oil often puts in outlier readings so we will give it the benefit of the doubt.
The Stochastic indicator looks to be making a bullish crossover.
The Bollinger Bands show price made its way back to the lower band in this final run down. If this is indeed the low then I would expect an impulsive move back to the upper band.
Summing up, I believe we have an important low at hand and a big rally will see price trade to new yearly highs.