Stopping volume on the weekly oil chart

In my last post for oil I wrote the following:

So where next for oil? Another key level awaits below at $55 per barrel and denoted with the blue dashed line. Another strong level which may provide support as it has done in the past. But if this is taken out also we might see oil trading back at $52 per barrel in the medium term.

And indeed this was the case with the support level at $55 per barrel duly breached with the heavily bearish sentiment for oil remaining firmly in place on the daily chart.

In the last few days, we have seen a retest of the $52 per barrel region which held firm before further selling has taken the WTI contract down to the psychological $50 per barrel which is now providing some minor support.

However, the question now is how much further south are we heading, and to answer this we need to move to the weekly chart. And what is interesting here is the volume and price action of last week. Note the high volume and narrow spread price action which signals stopping volume and therefore buying. So expect to see a consolidation in the price action at this level with congestion and rally in the medium term.

By Anna Coulling

Charts from NinjaTrader and indicators from Quantum Trading