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WTI Crude oil futures continue to consolidate in narrow trading range

Crude oil futures continued to trade in a narrow range yesterday on the daily oil chart, with the October WTI futures contract moving higher during the oil trading session and closing the session at $97.17 per barrel with a narrow spread up bar. This has continued the recent sideways consolidation that has been a feature for daily oil prices over the last few weeks following the breakout from the lower level of congestion in the $88 to $92 per barrel price level, which gave the oil market a solid platform of support for the next leg higher in this bullish move, which began back in early July.

The current congestion on the daily oil chart is clearly defined, with two Hawkeye pivots to the downside at the $93.70 per barrel level, and two pivots to the upside in the $97.80 per barrel area. These four pivots now define the upper and lower levels of the congestion, and once these are breached then oil prices will continue to move once again. The breakout when it comes is likely to be bullish, given that the three day trend for oil remains firmly positive, and with a bright green Heatmap, supported by buying volume in both timeframes, this is all adding to the positive picture. In addition, in the last few days we have also seen a conservative entry signal from our Roadkill indicator to the long side of the market, so once again this is confirming the positive trend. Once the breakout comes, then the current levels of congestion will provide an excellent platform of support for a continuation of the current trend, with the next target being resistance at the psychological $100 per barrel in due course.

Finally of course, this week sees the monthly FOMC meeting, and the markets will be expecting a firm signal from Ben Bernanke regarding QE3 following his broad hints at Jackson Hole, where he suggested that the FED was ‘ready to pull the trigger’. Should the trigger be pulled on Thursday, then expect to see further US dollar weakness in due course, with commodities in general and oil in particular benefitting from the weak dollar and extending current bullish trends further.

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