In my post on oil of the 10th July, I highlighted the importance of the ceiling of resistance at $60.20 per barrel and whether this was once again likely to play an important role in the bullish rally for oil over the next few days and weeks. The short answer is yes, with oil reversing strongly from this region to currently trade at $57.73 per barrel at time of writing and ahead of today’s weekly oil inventories which are forecast once more to be a draw, this time of -3.6Mbbls against last week’s surprise of -9.5Mbbls which helped to propel oil higher as a result.
However, the strong reversal from $60.20 per barrel has now introduced further signals from a technical perspective. As this level has been rejected once more, it becomes ever stronger with the red dashed line of the accumulation and distribution indicator developing accordingly by increasing in width to signal this failure. In addition, a further more minor region is also being built above in the $61.10 per barrel area. Next, we have two important signals, namely the rising volume and a breach of the very strong platform of potential support at $58 per barrel both of which combine to confirm the bearish sentiment now taking hold. Rising volume and falling prices is a classic volume price analysis signal.
Markets require volume to both fall and rise strongly, with yesterday’s volume and price in agreement as the heavy selling reinforced the wide spread down candle, and at the same time breaching the potential platform of support defined with the red and blue dashed levels on the accumulation and distribution indicator which now act in concert as a very strong ceiling of resistance.
So where next for oil? Logic would suggest the subsequent platform of potential support now waiting below at $56 per barrel and marked by the blue dashed line. Again, another key level and one which provided a platform for a recovery earlier this month. However, should this level fail to hold, below is a low volume node on the volume point of control histogram, and as such the price of oil may accelerate through here if breached. So as before, another key technical level which will come into play in due course.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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