Crude oil futures look like ending the month in a bullish mood, and provided we see today’s positive tone hold, then the commodity will end the week with five straight days of gains, reversing the sharp sell off of last week. The move higher this week has all been accompanied with sold volume on the daily chart, and with the September oil futures contract trading at $97.41 per barrel at time to writing, is now preparing to launch an attach on the $100 per barrel level once again, with several key areas price levels now coming into play.
The first of these is as shown with the green dotted line, a solid area of price resistance which extends for several months beyond the chart, and it is interesting to see that the attempted breakout of mid June was accompanied by low and falling volume. In other words a ‘fake out’ and a classic trap move. The falling and low volume is sending a clear signal that this is NOT a genuine move, but one designed to trap traders on the wrong side of the market. Any move away from this region is going to require rising and high volume, which will then confirm this is a genuine move.
The second key area is that shown on the volume at price histogram, with the sustained and deep area of price congestion now building steadily between the $93 and $96.50 per barrel area. Provided the current price action holds, then this should provide the springboard for oil to break out of the current congestion phase and develop a new bullish trend higher in the medium term. Moving to the fundamental picture, this week’s oil stats provided little in the way of direction for oil, coming in flat, against a forecast of a draw of 1.9m bbls. With the driving season in the US now ahead, and a positive technical picture, the oil market is preparing to break higher and take out $100 per barrel in due course.
By Anna Coulling