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