Trading oil futures using volume price analysis

Trading oil futures using volume price analysis

In this clip from the US futures trading session we show you how to trade the WTI oil futures contract using volume price analysis. Oil of course is one of those commodities which impacts the forex market and in particular the Canadian dollar.

00:14

Intro and oil 15-second chart volatility

00:14

The speaker welcomes the audience and confirms their setup is working, mentioning they have switched their microphone successfully. They express hope that viewers are safe and well. The session begins with a focus on the oil chart, specifically monitoring the 15-second chart in the top left corner while observing incoming price action and a volatility trigger.

00:48

Importance of 5-minute and daily charts

00:48

The segment discusses a volatility trigger exemplified by a long doji and a significant spike in volume, highlighting a quick price breakdown and a downward shift in the volume point of control. The speaker emphasizes the importance of analyzing multiple time frames, particularly focusing on the five-minute and daily charts, even for intra-day traders. The daily chart provides key levels of resistance and support, and slower time frames carry more significance in technical analysis because of their weighting in decision-making. Trading across multiple time frames involves prioritizing the slowest time frame as it defines the window of opportunity.

02:02

Daily chart significance and price levels

02:02

The slowest chart, particularly the daily chart, carries the most weight in analyzing oil prices. Since early June, oil prices have been fluctuating around a key level near $42 but have struggled to break through it despite repeated attempts. The volume profile is modest, influenced by seasonal factors and a strong support level indicated by the accumulation-distribution indicator. Additionally, the weakness of the US dollar, which has helped boost metals like gold and silver recently, has surprisingly not led to a significant rise in oil prices as might be expected.

03:30

Oil price struggles and external factors

03:30

The discussion focuses on the complexities of the market, highlighting an oversupply and lack of demand situation heavily influenced by political factors and OPEC’s future actions. The daily chart is used to analyze price levels and anticipate potential movements, noting significant candles and volume changes despite distortions caused by an unusual plunge into negative territory. Observations include a rally followed by weakness, with volume patterns suggesting attempts to break higher before falling back, reflecting typical price action and volatility on shorter timeframes.

04:56

5-minute chart volatility and volume analysis

04:56

The speaker analyzes a phase of price action characterized by volatility candles and falling volume, noting a narrowing spread that suggests weakening but not the end of the rally. They describe an arching effect with volume declining and highlight an anomalous candle exhibiting the highest volume on the chart but a disproportionately narrow spread, indicating a discrepancy between volume and price movement that suggests unusual market behavior.

06:17

Volume-price discrepancies indicating weakness

06:17

The market is experiencing weakness as it struggles to break through a resistance level, indicated by a narrow price spread and significant selling volume. Despite lower volume at times, the overall heavy volume and upper wicks on the candles signal selling pressure. This struggle is consistent with the daily chart, where the market has been unable to move higher for a prolonged period, highlighting the importance of understanding multiple timeframes as a trader.

07:13

Indecision and bearish signals on charts

07:13

The segment analyzes a market showing signs of weakness through price action and volume patterns. It highlights a long-legged doji indicating indecision between buyers and sellers, followed by attempts to rally that fail on falling volume. A bearish engulfing pattern confirms selling pressure dominating buying. Multiple instances of indecision and weak rallies suggest the market is poised for a downturn, although the exact timing of a rollover remains uncertain. Overall, the technical indicators point to a market under significant selling pressure.

08:36

Trading strategy and stop loss considerations

08:36

The speaker explains how to set a stop loss around the 42.65 mark and emphasizes patience in trading, waiting for reversals and heavy selling to confirm the right entry points. Rising volume signals weakness during attempted rallies, with large volume injections and volatility triggers confirming downward price movements.

09:35

The price experiences support and a repeat pattern at a lower level, but volume is too low to sustain a strong rally. This mismatch between price action and volume indicates that the price movement is unlikely to go far, suggesting weakness in the trend.

10:07

Further large volume injections occur alongside price wicks, signaling continued weakness despite attempts to rally. The price repeatedly hits resistance levels, and the presence of narrow-bodied candles with wicks suggests selling pressure and a weak market environment.

10:35

The question arises about potential trade targets, with a range between 42.40 and 42.28 offering possible returns. However, given the likelihood of congestion around these levels, traders must evaluate if the expected movement justifies entering the trade.

11:05

The price moves lower into a congestion phase after a brief decline, supported by heavy volume at certain levels. The market is unlikely to break through these levels without significant external events, indicating a challenging environment for further declines.

11:33

The speaker discusses the importance of identifying trading opportunities by analyzing volume profile points of control (V-POC) across different time frames, such as five-minute and ten-minute charts. This multi-timeframe analysis helps confirm key support and resistance areas.

12:02

The analysis continues with a focus on candle patterns, particularly two-bar reversals, which are critical for making trading decisions. The speaker notes the need to backtrack for confirmation but highlights the usefulness of recognizing these patterns when trading across different time frames.

12:24

Support levels and multi-timeframe trading

12:24

The speaker analyzes price patterns showing weakness with little resistance overhead but a solid support platform around 4220 and volume point of control (VPOC). They emphasize that this setup is suitable only for very short-term scalping trades, lasting seconds rather than minutes or hours. A recent 15-second chart segment showed a volatility trigger with significant volume that caused a quick price reversal, leading some traders to exit the market. On the one-minute chart, an unusually large volume anomaly was observed, which is abnormal and should raise caution. The speaker advises continuously monitoring candle patterns, price spreads, and volume to judge market conditions effectively.

13:57

Trend monitor signals and market weakness

13:57

The speaker analyzes market volume and trends during a trading session, noting weak rallies accompanied by falling volume and thin spreads. The trends indicate underlying market weakness despite some buying activity, suggesting that the market is not making strong advances.

14:20

The discussion continues on market behavior, highlighting a low volume node between certain price levels and heavier volume zones below. The speaker emphasizes constant chart monitoring to track market movements and notes some minor buying under a recent candle, though overall market direction remains uncertain.

14:44

The rally is described as weak with falling volume despite rising prices, indicating limited upward momentum. Trend monitors show red signals, reflecting a transition phase in market sentiment. The speaker explains that market sentiment shifts ripple through different time frames, with current indicators showing a move out of a positive phase into a transitional state.

15:10

Market trend changes are detected by various monitors, particularly on shorter time frames like 15 seconds, while longer-term charts such as daily remain unchanged. The ripple effect of trend shifts is explained, emphasizing that longer-term trends are less reactive to short-term fluctuations.

By Anna Coulling – creator of volume price analysis