An interesting technical picture is now starting to develop on the daily chart for crude oil following a period of some volatility in the light of various geo political events, in particular the situation in Egypt. The pullback for oil in mid July duly occurred and followed a pattern that I suggested at the time. The weakness was initially signalled by a long legged doji candle coupled with ultra high volume on the 19th July which saw the commodity test the $109 per barrel level, before pulling back towards the $103 price area.
Last week’s price action duly confirmed this as a minor pullback. However, the commodity once again failed to break the $109 per barrel price point as shown on the chart by the purple dotted line. The volume at this level is particularly significant in that we have ultra high levels, but with no advance in price, and indeed in last week’s bullish up candle this was accompanied by falling volume – a classic sign of weakness. Finally it is also interesting to note in the context of the volume that it is all ultra high and in sharp contrast to the trading volumes of June and July, suggestive of a selling climax.
Moving to the volume at price histogram, as we can the price region between $105 per barrel and $109 per barrel is now significant and building. For oil to continue its recent bullish momentum we now need to see a clear break and hold beyond the $109 per barrel price level, and should this occur then we can expect to see further momentum to the upside in the medium and longer term.
However, caution is the watchword, particularly on any longer term long positions.
By Anna Coulling