As we emerge from the summer doldrums and markets return to full speed ahead in the final quarter of 2021, it’s time to check in on some of the major commodities and indices, starting with crude oil. In my last analysis just over a month ago, I suggested oil was set for an extended period of consolidation with the VPOC which has indeed been the case with the fulcrum of the market now at $68.40 per barrel. As is often the case when price action congests around the VPOC, it also creates well-defined levels of support and resistance and this is also the case here with the red dashed line of resistance above ay just below $70 per barrel, and the blue dashed line of support below at $68 per barrel. Both of these have been generated by the accumulation and distribution indicator which creates these automatically, and each time a level is tested and holds, the line thickens accordingly. As we can see here these are well developed following the sideways price action of late August and early September, and in early trading at the start of a new week, the price of oil has breached resistance as it attempts to hold above the $70 per barrel level to trade at the time of writing at $70.32 per barrel.
The key longer term is, of course, volume but on two fronts. First, the volume associated with any move is higher, and as we saw on Friday, this was supportive of the widespread up candle which tested the resistance level, and moving forward we need to see the price rising with volume. Second, is the volume associated with the VPOC histogram, and here the key level is at $74 per barrel for any longer-term bullish trend to develop. This is the region at which volume falls away dramatically and so presents a limited barrier from a resistance perspective. We also have price-based resistance which comes into play at this level with the blue dashed line of the accumulation and distribution indicator.
In terms of oil inventories, broadly these have been reporting a weekly draw with only the occasional build which has helped to maintain oil prices. Longer-term, it is the $74 per barrel price area which is significant as this is where we see volume fall away on the VPOC, and an important price-based resistance level comes into play. Once this level is tested and cleared, provided it is on good volume, we should see oil continue higher in a bullish trend.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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