The word that comes to mind to describe the price action on the daily WTI oil chart is ‘stately’ with crude oil continuing to move higher in a series of small rallies then punctuated with a pause point and further consolidation.

Whilst many traders have been surprised at the recovery in the price of oil (USO, quote), I for one have not, and indeed highlighted the buying some weeks ago on the monthly chart for the commodity, and dared to suggest that buyers were now entering the market in volume and likely to take oil higher in due course. Since then we have seen stately progress higher with rising volumes on the daily chart as the price of oil moved away from the volume point of control in the $35 per barrel area, and through resistance in the $37.50 per barrel region before developing a secondary congestion phase below the $40 per barrel region. This was duly taken out in last week’s trading session with a firm move higher on Wednesday as we approach the high volume node now awaiting in the $41.45 per barrel level.

This is now being tested, and for the next leg higher to develop, a move through this region will require sustained effort given the level of transacted volume in this region. As we can see from the chart, this extends from the current price action up to $44 per barrel, and the next few days will be pivotal in defining the short term trend. If this region is breached with solid volume supporting the price action, then a move beyond the ceiling of resistance at $44 per barrel will then open the way for a continuation of the current bullish sentiment for oil. And with relatively clear water ahead on the volume point of control, a test of the next level at $47.80 per barrel now seems likely. The trend monitor indicator continues to remain firmly bullish and with the trend line remaining well above the fulcrum this too confirms the current bullish picture. Finally, yesterday’s test of support in the $40.41 per barrel also adds weight to the current positive outlook with only Wednesday’s oil inventories waiting around the corner.

Anna Coulling is a trader with over 16 years’ experience and founder of AnnaCoulling.com