May 16, 2011
- in Uncategorized by schooloftrade
Bear Channel Great Buying Opportunity on Crude Oil
830am est
– We’re seeing very sloppy and slow markets this morning
– We had 830am news that barely moved the markets we trade most
– We know that Monday’s are always a little slower to being, so we take our time, getting into the rhythm of the hour/day/week and we wait for the best price action.
– Empire State Manufacturing Survey came out lower than expected
o Negative outlook on the manufacturing sector in NY
o This could be assumed to be consistent in other major cities here in the US and abroad
o Dollar BEARISH
o Gold BULLISH
o Crude Oil Bullish
§ May have the opposite effect on crude oil, fewer factories shipping products, using trucks, consuming crude oil
o Rather than trying to interpret this information, as you can see its hard, we’d rather make it easy on ourselves and watch the DOLLAR INDEX
855am est
– We start our day with the dollar index 06-11 contract and I use the 34range chart to see the BIG PICTURE.
– The swing highs on the dollar continue to give us new levels of support and resistance with a horseshoe pattern
– The 34range chart is great for SWING TRADERS, but for day traders we need to see the action RIGHT NOW
– 34r tells me what HAPPENED, so swing traders will see bullish DX trend and stay net short.
– Day traders need more information, so lets zoom in and use a faster timeframe to find the EXACT price levels the dollar will be using today.
– The dollar is all about NOW, not what happened last time.
– We need to know if the dollar is rising or falling, and then we use this info to make educated decisions:
o Read tape on the dollar
o Read the speed on the dollar
o Average true range
o 13range chart
900am est
– We check the dollar 13range and see a bearish price channel off the highs of the week least week.
– Dollar Bear = Crude/Gold Bulls
– Falling dollar = buying pullbacks on the markets I trade most.
– The key will be to watch the dollar throughout the entire session today, always looking for new lower lows or higher highs
– We DO NOT want to see a wedge pattern and a slow speed on the dollar, so we will watch closely.
930am est
– We have the dollar at the LOWS of the price channel, and we also have the BMT at 76.674.
– This tell us the price will be sloppy until we break free of this area around the BMT
– If the dollar trades sideways at the BMT we MUST beware of difficult price action
955am est
– We wait for the news @10am est today regarding the Housing Market Index
– In the meantime, we have crude oil trading around the BMT on the 34r chart, which tells us to beware.
Let’s review the 34range chart on crude oil:
– Price Wedge, we are at the highs
– Sideways Range from 100.70 down to 97.09
– We see the PHOD is above, and the PLOD is below, this means INSIDE TRADING DAY
o Treat this as a sideways market that will NOT breakout, so sell the highs and buy the lows, trade INSIDE the range from Friday
– We have major levels of resistance at 100.70, 99.85, 99.52
– We have levels of support below us at 97.67, 97.09, 95.55
– These levels may not be used today, but if we need them, ill be happy I have them handy.
Lets plan our attack on crude oil futures:
If prices rise:
– Selling resistance first, and then buying pullbacks with new higher highs
– Never buying the highs, I wait for pullbacks
– Selling 99.40, 99.55, 99.73, and 99.85
– Avoid the big round number of 100.00
– Selling 100.49, 100.70 and avoiding the 101.00 BRN
– With the DX in a bear channel with new LL’s we can say the LONG trades will likely be the higher % position with the dollar trending down
If prices fall:
– I’m buying support levels first, and then selling new lower lows with retracements.
– I will not sell the lows, wait for a retrace off the new lows and then look for entry rules to confirm.
– Im selling the highs of the wedge below 98.75
– Im avoiding the BMT 98.69 and the OPEN 98.74 because these levels will be sloppy
o I am aware these levels (Open/BMT) are at the highs of the wedge, making it more difficult to sell the highs
– Buying 98.37 the PLOD from Sunday (not as important as the PLOD from Friday)
– Buying the lows of the wedge at 97.67 which is also the current LOD
– Buy major support at 97.09 the PLOD from Friday as well as the support at 96.16 and down at 95.55 the lows of the major wedge.
–
1025am est
– We are after the last major news this morning and before the 1130am EST European Close
– This is known as the time when the BIG MONEY leaves the markets after the news and the smaller trades can move the markets around.
– “While the cat’s away, the mouse will play”
– The best way to trade this time of the day is to find the easiest pattern and be a little aggressive taking the profit at the extreme highs or lows of a wedge/sideways range/ channel
– We see the end of the best price action after the news finishes each morning, then with the big money leaving we now can assume the day traders will have an easier time seeing bigger moves, with no larger orders moving things around.
– Lack of big money = lack of speed = lack volume = lack consistency
– In all reality the dead zone is a LOW VOLUME trade.
1125am est
– My alarm goes off for the 1130am European Close
– We’ve had plenty of trading opportunities today, but the lack of consistent price action has made it challenging to see any BIG moves or BIG winners.
– 1130am is going to be a good time to make some money
– We don’t expect to see a golden lunch, but it MAY show up
1130am est
– We see the 21r trigger line support breaks, gets us below the 99.00 big round number and we get short
– Very weak market shows up, we can’t keep dropping
– This tells me to be careful!!
– We’re looking for some big moves this time of day, but nothing is written in stone.
