June 8, 2011
- in Uncategorized by schooloftrade
OPEC Says No… Crude Oil says GO!
We begin our day reviewing the news. We know today has 3 phases of crude oil inventories, which means we need to be aware the market personality will be transitioning twice today.
We also know that OPEC has their meeting, which will have everyone waiting to hear the news from OPEC.
We also know that the Beige Book is later this afternoon which will be on the minds of traders as well because it is directly related to the FOMC announcement in 2 weeks.
Don’t forget, we have the G8 summit later in the week. Shouldn’t be too bad on volume today, but so we are aware.
The news tells me to be selective when trading crude oil, I can’t expect a golden lunch, so get in, get out early and take your money to the bank.
845am est
We begin with the dollar index 06-11 contract.
Our 89range chart shows the DX at the lows of the wedge (buy the lows) and we are trading in a very distinct sideways range from 74.090 down to 73.540.
This tells me…
We’re at the lows of the wedge, so the higher % move will be the LONG side. We want to buy the lows of any range.
It may also trade sideways if the market lacks direction/confidence in the future.
It may also drop to the lows of the range.
All three scenarios require me to plan for them:
– Dollar drops = buying pullbacks on the markets we trade.
– Dollar Rises = selling retracements as prices fall
– Dollar Sideways = buying the lows and selling the highs of the range we are in. Treat it as an INSIDE day.
Remember the 89range chart shows me the BIG PICTURE, and it does NOT show me what the price action is doing RIGHT NOW.
I’m a day trader, I need to know what’s happening NOW. What does the 13range chart tell me?
The dollar has reacted with a bullish tone to the news from Bernanke last night.
Bullish dollar = bearish crude, gold, euro, Russell, etc.
Our plan of attack on the Dollar:
– We anticipate a rising dollar, so looking to sell retracements, sell price reversals at resistance will be the highest percentage today.
– This may change quite easily, if the dollar begins to trade sideways.
– If the dollar drops back down to the lows again, we then begin to look for buying opportunities at support.
915am est
As we prepare for the day ahead, we must wait through the US Market open at 930am
Lets plan our attack on Crude Oil Futures:
89range chart shows me…
– Price Wedge
– Sideways Range
– Bear Price Channel
– BMT above us
– 100.00 is above us
34range chart tells us…
– Started as an inside day
– Broke new highs after OPEC news and became outside day, we will be looking for the transition back to an inside day if price falls.
– BMT is below us, which will act like a magnet
– OPEN is below us, also a price magnet
Our plan of attack is as follows:
– We are going to be extra selective in the trades we take today
– OPEC news and Inventory news will have the personality changing frequently, so be careful.
If price rises:
– Sell first at resistance, buying after we see new higher highs and with a pullback
– We do NOT buy the highs, we buy pullbacks
– I will sell the highs of the wedge 101.50,
– Sell the resistance overhead at 102.90, 103.39
– We don’t have a lot more levels to work with, so we can also use the AB=CD pattern to find easy profit targets as price rises.
If price falls:
– Im buying at support first, then selling retracements with new lower lows
– I am not selling at the lows, use a retracement.
– I’m selling below 100.90, below the 100.65
– We expect to make all of our profit as it falls back down, so look for new lows and sell the retracements.
– Avoid the big round number of 100.00
– Take profit at the BMT and avoid trading at the BMT 99.95
– Sell below 99.85 (highs of the range before)
– I will buy the 89r trigger at 99.41, and buy the lows of the range at 98.05
930am est
We get news from OPEC that they have NOT reached a decision.
“OPEC Sec General: delegates unable to reach any consensus on oil production increase; will maintain current output level, assess the situation for three months- Opec President: Some members sought an immediate production increase, others wanted to wait three months to assess whether a production hike is needed. – Final proposal is that OPEC will wait 3 months to reassess the situation – Kuwait Oil Min: OPEC will not have a formal meeting in September1030am est
We wait for crude oil inventories to pass, making sure we don’t jump in too early.
Even though we may know exactly what to expect, we still need to wait for the speed to settle in and the direction to take form.
Earlier this morning we got an idea of what that sloppy, almost un tradable price action FELT and LOOKS like.
1035am est
News comes out mixed and the crude oil market trades flat.
I assume the mixed results (rising and falling inventories) are causing traders to re-analyze their short term price prediction and their opinion on value.
After 1035am this is the THIRD phase of the day.
This time of day we either need to wait for price to slow down (not the case right now) or we wait for the market to develop a personality.
There are three different options for the rest of our morning after 1035am.
Price Rises: Sell resistance overhead, and then buy pullbacks.
Price Goes Sideways: buy the lows and sell the highs of the range we are in.
Price Drops: Buying at support
1045am est
Now let’s review the Gold Futures while we wait for crude oil to make its move…
Our 89range chart on Gold tells us…
– Short term bear channel
– Sideways range(s)
– Long term bull channel
– BMT is below us
