Whilst the price of oil remains bullish it has settled at the price I suggested it would in my analysis of the last couple of weeks and is currently trading at $60.69 per barrel at the time of writing. It is the monthly chart that dominates from a technical perspective with last month’s price action taking us smartly to the volume point of control, the yellow dashed line, which is the fulcrum of the market on this timeframe, and hence my confidence that the price would pause and consolidate in this region.
Over the last four months, we have seen the oil price rise with rising volume, and last month’s wide spread up candle on good volume delivered us to the VPOC which marks the heaviest concentration of volume over time on the chart, so we can expect the price to move into congestion at this level. But once this congestion phase is over, where next for the price of oil and here we have to consider other technical factors. First, price-based resistance, and here it is at $67 per barrel where we have a strong level denoted with the red dashed line on the accumulation and distribution indicator. The thickness of this line tells us automatically that it is an extremely strong level and one which is likely to come into play soon and which will require significant volume if it to be breached. Below we now have an equally strong platform of support in place and denoted with the blue dashed line. This is often the case around the VPOC as the congestion then develops these levels accordingly.
Finally, note how the volume histogram falls away once we move to $70 per barrel and beyond therefore making progress straightforward for further gains. So in summary, we can expect congestion at $60/62 per barrel for some time, followed by a test of the $67 per barrel area, and if the price breakouts out from here and clears this resistance we could see it climb all the way to $90 per barrel longer term on good volume.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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