The below is the daily chart of UKOil. We have added a Bollinger band and an RSI(9) as a template. We note that the Bollinger band is narrowing (green square) and that this “squeeze” is symptomatic of the decline in the volatility of Brent crude. This phenomenon is often regarded as the proverbial “calm before the storm.” I.e. the market may be setting itself up for the next trending move. The problem with the Bollinger band is that although it measures a contraction in volatility it doesn’t make provision for the likely direction of the ensuing breakout. The RSI may provide clues here. It is over 50 and thus on the bullish side of the oscillator. A break above its green trend line is likely to signal an upwards bias in the short-term.
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