Another day and another negative one for crude oil, which has continued to moved lower once again, gathering momentum as it does. Today’s price action has been no great surprise following yesterday’s weak attempt to rise, with the high of the session running into the resistance in place at the $94 per barrel level, before closing below the potential support area at $92.90 per barrel. This level duly capped this morning’s effort to recover lost ground, before moving sharply lower through the US session to currently trade at $91.53 per barrel. The key now is whether the well defined platform of support as defined with the blue dotted line, holds firm. If it does, then it may provide a platform for a short term bounce higher, but any close below, either tonight or in the next few days, will then increase the bearish sentiment for oil, and a move through $90 per barrel is likely to see $86 per barrel tested in due course.
The associated volumes of the last few days, also confirm the bears are fully in control of this market, with yesterday’s price and volume a classic example of a weak rally in a weak market. If tonight’s closing volume exceeds that of yesterday as expected, then from a volume price analysis perspective, this will further confirm the heavily bearish picture. Indeed, even today’s modest decline in oil inventories at Cushing did nothing to stem the flow, and despite coming in on target with a draw of -1.0m bbls, over supply issues in the pipelines still dominate, and with global economies struggling, coupled with a potential slowdown in China, the longer term outlook remains bleak. And then of course, there’s the US dollar, which is also playing it’s part. The slippery slope just got steeper!
By Anna Coulling
Hi anna I have a question regarding volume analysis. Does the volume of the asian session have an affect on the london session. Would it be more important to pay attention to the volumes of the previous london session?
Hi Chris – many thanks for dropping by and taking the time to write, and this is a good question. As I’m sure you know volume is always relative. Volumes on the London session are always much heavier than volumes in the Asian session as the London/Europe trading period has the deepest liquidity, so we always have to bear this in mind when trading using volume price analysis. A high volume bar in the Asian session, would be a low or medium volume bar in the London session which makes it tricky when you are trading longer term as this then encompasses a 24 hour period. Intraday its easier as you are then looking at a chart which covers the period you are trading, and volume is then relative. It is a question of judgement and over time you do develop a memory of what is high medium and low, so when trading the London session the following day, you will have an idea from past experience of the relative highs and lows for each session. You will be surprised how quickly you build up this knowledge when studying charts all day:-) – all best wishes and thanks again for a great question – Anna