Oil 5 Point Broadening Low (D)
Created on Tuesday, 25 August 2015 23:12
Written by Austin Galt
Oil has hit new lows so obviously the bear market was not over after all. However, there looks to be a common bottoming pattern in play – a 5 point broadening low. Let’s take a look using the daily chart.
OIL DAILY CHART
Previous analysis called for a higher low which saw a nice one day rally before price came back down and cracked to new lows. That meant price was likely to test the lows which brings us to the present.
We can see the 5 point broadening low formation denoted by the numbers 1 to 5. The point 1 low was identified and I thought that was the final low. Wrong. The point 3 low was also identified the day it took place and I thought that was the final low. Wrong. And so here we are at the point 5 low. Third time lucky?
The Bollinger Bands show this low traded a bit below the lower band which is commonly found at lows. Now we want to see price eventually get back to the upper band and trend higher from there.
The RSI has set up a triple bullish divergence at this low which often leads to a significant rise.
We may see a little test of this low at $37.75 with price perhaps even trading a touch lower but it is still my opinion that price won’t trade below the 2009 low at $32.70.