Crude Oil is testing significant resistance after rallying from critical support between $75 and $75.75. However, will buyers push price through $90? Here’s my take..
Power of the “P”
The daily chart of Crude Oil shows price has established a clear trading range from $75 to $90.50 over the last three months of trading. Crude has made several passes within this range, and will likely continue to do so until the market is ready for another round of price discovery.
What’s interesting about this current bounce is the fact that the Volume Profile (using the Volume at Price indicator) is shaped like a “P”.
For those of you familiar with profile shape analysis, you’ll remember that a P-shaped profile usually indicates a short covering rallying when the pattern forms during a downtrending market.
Short covering rallies are usually seen as temporary strength, as no new “business” is being conducted. That is, market participants that were short are now covering their trades in order to pocket their winnings.
In essence, no new buyers are entering the market, which usually leads to price stalling, thus creating a “sell the rip” opportunity.
Crude has been trending steadily lower since topping out in April and May, with each rally leading to another wave of selling pressure.
Given that a P-shaped profile has developed, we can expect another round of selling ahead, especially if price cannot push beyond the $90 – $90.50 resistance area.
However, if price can break (and close beyond) the $90.50 price zone, there is a lot of “clear air” above, which could lead to a swift advance.
Either way, Crude seems to be winding up for the next big swing move, so watch it closely.
Volume Profiling Techniques
Speaking of the power of the “P”, I’m teaching my new course Volume Profiling Techniques this Tuesday. It’s a 3-hour webinar that is chock-full of powerful VP concepts, like the one above.
You don’t need any fancy indicators to follow along, as long as you have access to a Volume at Price indicator, which you can actually use freely on several charting websites, like BigCharts.com and StockCharts.com.
This is one of my favorite topics and should prove to be one of my best courses to date. To read more about the course CLICK HERE!
I hope to see you Tuesday! Let’s see how this Crude Oil setup turns out!
Cheers!
Frank Ochoa
PivotBoss.com
Follow Frank on Twitter: http://twitter.com/PivotBoss
Dear Frank,
I have been following your posts since couple of months. What sets you apart from the so called gurus is your practical and applied dimension of market profile. It is just awesome. I liked the current article and will be tracking crude on those lines.
I just want to know that what does ‘b’ shaped volume profile indicate? profit booking? or fresh shorts? today’s EUR/USD chart has “b” shaped volume profile
Thanks
Kashyap
Thanks for the kind words, Kashyap!
You are correct, a b-shaped vol profile indicates Long Liquidation (profit-taking for traders that are Long). However, a b-shaped profile must develop in the context of an uptrend for this assessment to be most accurate.
Thanks for reading!