June 24, 2011
- in Uncategorized by schooloftrade
Price Wedge & Reversals for Easy Profit on Crude & Gold
We prepare for the 830am news and we know the GDP is supposed to be big, but our experience is always mixed. We do a lot waiting and then usually the markets don’t make a very big move.
The important news for me is the Durable Goods orders, it shows me the strength of manufacturing sector that we use along with the Fed Manufacturing Surveys to make educated decisions on the crude oil inventories every Wednesday.
Durable Goods rise = manufacturing sector is strong.
Strong manufacturing = higher demand of crude.
High demand of crude = lower inventories
So next week if we get higher inventories and lower DGO…we can assume price should drop.
Here’s how we beat the market…when DG drop, and then inventories drop…now this confuses the market.
Most traders see LOWER inventory as high demand and higher prices.
Supply drops from DG orders dropping we get the same thing…falling inventories…which is NOT from higher demand, its from lower supply.
845am est
We begin the review today with the US Dollar Index and use the 89range chart to start.
We see a narrow price range inside a bull price wedge. We are trading around the BMT and this wedge and BMT are big clues for the day ahead.
When the US Dollar index is in a narrow wedge it will be red flag for sloppy and choppy markets on crude, gold, euro, Russell.
Clue #1 = dollar narrow wedge (higher risk)
This is the long term timeframe, lets use the 13range chart to see the short term trend on the dollar.
The 13r shows me a slight bullish channel trend up and trading sideways in the short term.
This may change so we watch this all morning as it develops.
How do we use this dollar info to make profit?
– Be more selective in your trading b/c this chart tells us the market will be sloppy and slow today.
– We have a slight bull channel, so rising dollar is expected, and this will mean selling opportunities on Gold, Crude, Euro, Russell, etc.
– If the dollar can’t make new highs and trades sideways we need to be careful if it stays near the BMT, but a sideways markets will mean I can trade both directions with same %
– If the dollar made new lows, we will then look for buying opportunities on the markets trade most.
900am est
We have slow and sloppy markets even after the GDP news at 830am est.
Dollar in the middle, we’re waiting for some ‘personality’ to show up this morning.
Lets review the crude oil futures…
We have an inside day which means I want to trade INSIDE the range we’re currently in. I want to sell the highs, buy the lows, avoid the middle, and avoid the fake-out breakout.
Big money trigger line (BMT) is above us, and will always try to drag price in its direction. So we can expect that traders will try and push price higher to test the BMT.
The OPEN of the day is also a price magnet, right nearby to the BMT.
Price Wedge tells us to sell the highs, buy the lows, and avoid the middle.
Price wedge also tells us TIME IS NOT ON OUR SIDE.
We get clues today that tell us to be very selective (slow dollar), trade inside the range (inside day) and avoid the fake-out breakouts (wedge).
Lets plan our attack on crude oil:
If price falls:
– Im buying support levels first
– Then selling retracements below the support as it turns to resistance
– I do not sell the lows
– Im buying support at 90.73, 90.52, 89.89, 89.69
– Im buying at support levels at the lows of the wedge, the low of the day, and the PLOD.
– I will avoid the big round numbers on the way down
– I will sell using retracements once we break the support.
If price rises:
– Im selling at resistance levels
– Im then buying a pullback when we break resistance it turns into support.
– I will not buy the highs, I buy pullbacks.
– Im selling resistance at 91.49, 91.67, 91.95, 92.31, 92.40
– Im avoiding the big round numbers
– Selling the resistance at wedge highs, high of day, and the PHOD.
– Avoid the BMT at 92.00 and avoid the OPEN at 92.25
930am est
We have crude oil still trading in a narrow price wedge, and we know the dollar is also in a price wedge which means we need to be selective, wait for those highs/lows to be tested.
