The trend reversal for oil is now well underway and as I outlined in previous posts the volatility trigger on ultrahigh volume would define the price levels in the short and medium-term with congestion following this plunge in price on the 21st April. This was followed by further buying on the 28th April on high volume, and since then the recovery has developed with the trend monitor duly transitioning from bearish to bullish and move above the high of the volatility candle of the 21st at $22.58 per barrel which was cleared last week. Now we are approaching key technical levels that are likely to define the next few days of price action in the longer-term move higher from a price and volume based perspective.
First, we have two important price based levels denoted with the red and blue dashed lines. These are from the accumulation and distribution indicator which delivers these levels as thicker or thinner depending on the strength of the level. In this case, we have two relatively thick regions of resistance, one at $26.75 per barrel and the other at $33.50 per barrel. Note the lower of these levels was tested and held last week, adding further strength.
Sandwiched between the two we gave the yellow dashed line which is the volume point of control and as such an area of high volume-based resistance as we can expect the price to congest in this region. So in the short term, $26.75 per barrel is the first key level and this needs to be breached with good volume below. Thereafter we can expect the price of oil to congest in the $30 per barrel area, and any move away from the VPOC will require a further injection of volume to take out the resistance at $33.50 per barrel.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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