As we start a new trading week, there are two clear reasons we can expect to see oil consolidate in the current region and continue to move sideways. The first of these is the significance of the volume point of control as denoted by the yellow dashed line for the VPOC indicator for NinjaTrader and currently anchored in the $40.50-per-barrel area, just above the price of $40.38 per barrel at the time of writing. The VPOC settles in the area of heaviest transacted volume on the chart and so presents the area of fair value, where bullish and bearish sentiment is in equilibrium and which will only move, once either side duly prevails. It is, therefore, the price level at which we can expect to see congestion build as a result with the price oscillating between $39 per barrel and $42 per barrel. Note also the volume falling as the market tried to rally, and adding further confirmation of weakness.
The second reason to expect oil to trade in this range for some time, is the extremely strong resistance level denoted with the blue dashed line at $42.50 per barrel. As can be seen this is one that has been tested and held 12 times in the past. This level appears on the accumulation and distribution indicator and automatically increases in thickness each time a level holds and so presents an instant visual picture of the strength of each level. Note the blue dashed line at $38.70, which has been tested three times in contrast and, therefore, less thick.
So from a technical perspective, expect to see more of the same for oil, and given the weak fundamental picture and strengthening in the U.S. dollar, this too is unlikely to add much positivity to the price of oil in the short term.