In my previous post on oil I suggested we were waiting for a clear breakout from the recent extended phase of sideways price congestion which has seen the commodity oscillate between $102 per barrel to the downside and $109 per barrel to the upside.
At the time these levels were clearly defined with the price resistance firmly in place at the $109 level. The breakout duly occurred on 28th August and what was particularly interesting was the combination of volume and price that was created in this move. The candle itself was a shooting star – clearly not a strong signal in itself. This was further evidenced by the volume which was high, and therefore suggesting selling at this level with profit taking in a volatile market. Clearly not a good sign, and the market duly reversed. This also coincided with month end, and recent news reports have also suggested the unwinding of a large bullish position.
The ongoing problems in Syria continue to impact the oil price which is likely to remain volatile, and in addition we have the issue of any tapering of the bond buying programme by the FED, which will impact the US dollar with a consequent knock on effect into commodity prices.
For the time being these key levels still remain in place with the platform of support in the $103 per barrel region and resistance firmly in place at the $109 per barrel area. As with gold (see my previous post today) any breakout from this region has to be associated with high volume and the correct candle combination. A shooting star candle is NOT a good sign, a wide spread up candle IS!
By Anna Coulling