As expected, oil has continued its longer-term bullish sentiment and is now moving firmly towards the $85-per-barrel price target, which I highlighted some time ago as the initial pause point at the extreme of the VPOC histogram. What is also clear on this chart is the significance of the $75-per-barrel level, which brought a halt to the rally of the summer months. This level is now acting as a strong platform of support as we continue higher following its breach in late September.
The current rally started with the two-bar reversal in August that saw the prior week engulfed with the up candle. In doing so, it is sent a strong buying signal. Since then we have seen oil rise on increasing volume on the weekly chart. This confirms it as a genuine and longer-term move from a technical perspective.
Stepping down to the monthly chart gives us that all-important longer-term perspective. Here we can see the significance of the level now being tested as the markets open on the new trading week. This price is denoted with the red dashed line of the accumulation and distribution indicator at $83 per barrel with the price currently trading at $83.02 per barrel at the time of writing. It was this level that precipitated the collapse in oil prices in 2018. And while this is not something I anticipate this time around, we must nevertheless be aware of its significance and potential. Its significance is that it may cause a temporary pause before we push on towards the $85-per-barrel area. Thereafter, $90 per barrel comes into view, which is where volume falls away dramatically on the VPOC histogram.