Anatomy of a low

The following chart highlights the creation of a medium-term low in oil. Price was falling into the end of 2013, where the low was made.

The break of the downward trendline is important and the market usually rallies before retesting the lows (or near to).

The rally in price through the first half of 2014 gave us two important trendlines to gauge the breakdown in price. Note also that the rectangle around the bottom is around two months in length before the final low.

The next chart shows where price went in the second half of 2014.

The key points here are the trendline failures at rectangle A & B. The failure at A was the final attempt to form a low at the year-to-date low around $92.