The daily chart for oil is one which is developing precisely as forecast over the last few months, and one which highlights a fundamental plank of the volume price analysis methodology which is support and resistance with a classic example here. However, just to restate the price of oil is going nowhere for the time being given the current lack of demand, and we will only see a strong move higher should OPEC step in and impose supply controls on its members. But even if it does, history would suggest these rarely hold, and so from a fundamental perspective, little is likely to change, and even US dollar weakness is unlikely to provide any meaningful support.
From a technical perspective, it is the red dashed line at $42 per barrel which is the standout level. This has been generated automatically by the Accumulation and Distribution Indicator for NinjaTrader and works in a simple way. The more a level is tested the thicker the level is displayed on the chart, thus giving an instant visual picture of strength and weakness, and as we can see this is a level that has been tested and held on seven previous occasions and as such is extremely strong capping a rally in mid-September and two more in October and so presents a formidable barrier to any recovery and one which will only be breached with some serious volume.
Below this, we have the VPOC as denoted with the yellow dashed line which acts as the fulcrum of the market in the $40.60 per barrel area. This is where the price is in agreement with no bias either way and where we have remained for two months and given the technical and fundamental picture is where oil is likely to remain for some time to come.
By Anna Coulling
Charts from NinjaTrader and indicators from
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