The weekly chart for WTI oil futures perhaps best sums up the current technical picture for crude, and even the word crawl higher seems an overstatement of the price action, which has seen oil remain rangebound around the $41 per barrel region since late June and despite several valiant attempts to rally has yet to break free from this area, with longer-term investors now pinning their hopes on the OPEC meeting later this week.
From a technical perspective, the most encouraging aspect is the almost complete lack of volume on the volume point of control histogram between $45 and $51 per barrel and given this is the case, the linear volume required to drive the price through this region and on towards $55 per barrel and beyond will be less, given it is presenting little in the way of resistance ahead from a volume perspective. So an encouraging sign and one confirmed with the trend monitor indicator at the bottom of the chart which remains blue and reinforcing the fact that if the $42.50 per barrel area can be breached, we will then have a strong platform of support in place for a more sustained rally.
Last week’s surprise draw in oil inventories did little to help the longer-term picture as demand remains weak and with oversupply an issue the market is waiting for a strong signal from OPEC with regard to cuts in production. But as always whilst these may be agreed, whether they are implemented and maintained is another matter. Not even China’s recent buying spree and continued weakness in the US dollar have offered a much-needed boost. So if OPEC can deliver, expect a solid breakout built on a solid platform of support.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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