Crude oil breaks higher but watch the volume!

Crude oil futures - daily chart
Crude oil futures – daily chart

A quick update on the oil price, in particular the WTI September contract, following its recent breakout and move. The question now is how high is the price likely to go, and for a possible answer let us take a look at the daily chart for some clues.

Last week’s price action was defined by the break through the $106 per barrel price point where the commodity had remained range bound for several days, moving between $104 per barrel to the downside and $106.20 the upside. This area of price consolidation is clearly defined by the volume at price histogram, to the left of the chart.

Thursday’s price action was significant with a breakout from this congestion and was coupled with rising volume, almost always a precursor of further bullish momentum. However, Friday’s price action was equally significant, but for very different reasons.

First, the daily candle closed the session as a doji, not long legged, but certainly significant. Second, the associated volume was ultra high and for volume price experts this is a worrying signal. After all, ultra high volume should be associated with a clean and wide spread candle, and this is clearly not the case here.

Therefore, given these seemingly contradictory signals we should not be surprised to see a pullback in the price of oil, or at the very least a period of sideways price consolidation before any resumption of the current bullish trend. However, any pullback should find support at $106 in the short term.

By Anna Coulling

About Anna 1036 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

2 Comments on Crude oil breaks higher but watch the volume!

    • Hi GK – many thanks for your comments – I hope you find my market analysis helpful in your trading in the future,and you may also find some of my books of help. Here is a link to my latest book on Volume Price Analysis, which you can apply to all markets and instruments. – Hope this helps and all best wishes – Anna

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