No Surprises In The Price Of Oil…..For Traders Who Use Volume

The bullish momentum for oil has stalled in the last few days and as forecast in previous posts oil is now congesting around the $60 to $62 per dollar barrel as expected, but still retaining the upwards momentum of the last few months. And once again it is volume which reveals the true direction of the market with strong buying evident on Friday, which duly resulted in a surge in the market on Monday.

The candle in question is the one annotated on the chart and as we can see although the day closed with a narrow spread down candle the volume was higher than the previous day and is therefore clearly an anomaly. Why? Because given the amount of volume, we should have expected to see this candle close as a wide spread down candle and not one with a narrow spread. Hence the conclusion, the big operators are stepping in to buy in this down move and prevent the price from falling further. This is classic volume price analysis where we are constantly asking if price and volume are in agreement. If not, as here, then it’s time to ask why. Monday’s sharp move higher on good volume came as no surprise to volume traders who apply this methodology. And from a technical perspective, the outlook for oil remains positive and once we have cleared the current congestion expect to see the price continue higher towards $65 per barrel and beyond.

(Click on image to enlarge)

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