Over the past four months, crude oil has declined about $50. However, during the past fourteen trading days, March crude oil had been rotating within a 4538-to-5078 balance range. On Friday, January 23, 2015, the market took out the 4538 fourteen-day balance low by three ticks early in the day session before rallying. This was followed by a late day selloff, settling within thirty ticks of the 4538 balance low.
When a volatile market such as crude oil is contained within a relatively tight range for several days, a significant move usually follows the breakout from balance. However, if an attempted breakout from balance fails, a rotation to the opposite end of that balance range is the most likely scenario.
If the market gains acceptance below the 4538 fourteen-day balance low, the market may test the 4420 weekly/monthly chart reference. Additionally, the next downside references on the monthly chart are 4383, 3944, and 3248.
If the market fails to gain acceptance below 4538 fourteen-day balance low, it may begin a rotation to the 5078 fourteen-day balance high.