The daily chart for oil makes for interesting reading following the extended congestion phase which has seen the commodity struggle to break away and move higher, constantly testing and retesting the $43 per barrel area. Yesterday’s move lower confirmed the weakness for oil at present closing on a wide spread down candle and supported with high volume as we retrace to the volume point of control which sits at the $41 per barrel area. A classic example of Wyckoff’s third law of effort and result with volume and price in agreement.
The yellow dashed line is the fulcrum of the market and defines the greatest concentration of volume on the chart. The VPOC indicator also introduces the concept of time to the volume price relationship and so describes the concentration of volume on the Y-axis of the chart along with the associated high volume and low volume nodes. In the short term, given we are now trading back at the volume point of control we can expect to see further price congestion in this region and with a strong level of potential support below in the $39.70 per barrel area as denoted with the blue line of the accumulation and distribution indicator, this is also likely to come into play in the near future.
In summary, expect to see further congestion at this level, and a new trend will only be established once we break away from the VPOC, a move that has to be associated with strong volume to confirm any such move.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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