The weekly chart for oil is an interesting one from a technical perspective, with last week’s price action adding further weight to the argument that the commodity is developing some upside momentum, and for evidence of this we need to look no further than the candles themselves and the various support regions below.
If we begin with the price candles, the point here is the wicks which are always key, and since the middle of September, each weekly candle has closed with a wick to the lower body, with virtually none to the upper body. This in itself reveals the buyers stepping in on each reversal lower, with two strong examples of this concept. The first as we moved from October into November, and the second last week where oil fell to $54.85 per barrel before recovering to close at $57.77 per barrel. On each occasion the market fell only to recover strongly and so creating the deep lower wicks. This price action was also associated with good volume as oil attempts to break away from the volume point of control in the $54.40 per barrel region. And to add further support to any move higher, we also have a very strong level of price based support at $52 per barrel denoted with the blue dashed line of the accumulation and distribution indicator. This is extremely wide and therefore a very strong area which has been tested repeatedly and held firm on previous occasions.
However, for a development of some bullish momentum, we do need to see the two minor resistance levels breached in the $61 per barrel area with stronger resistance then coming into play at $64.40 per barrel and denoted with the red dashed line, which is likely to halt any advance higher. Finally notice the trend monitor indicator which is signalling this shift in sentiment for oil with $60 per barrel and beyond now looking likely.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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