Well…that was way too easy day trading crude oil

Open your 89-range chart on Crude Oil this morning and you see the following:

– Dropped below the bullish channel from last week, but price has made a higher low, which gives us a clue that price will likely get back into this bullish channel.

– With the news overnight about Osama Bin Laden, and looking that anytime this has happened in the past there has been MORE concerns over supply/demand of crude oil, this would be expected (fundamental analysis of this market)

– New highs and new lows have created a bullish price wedge pattern, which we will use to trade inside of today

– We also see two sideways trading ranges, and we will use these as our guide as well.

– Now lets use a faster timeframe, open the 34range chart and you begin to see much more detail, and we can put together a specific plan of attack:

o We have CAD news @ 830am today which MAY spark the market into some early morning movement
o There is no clear dollar trend, so no dollar correlation bias today at this point (that may change)
o Trading @ the OPEN at 830am est tells us to beware of sloppy price action with low volume
o This further confirms our assumption that traders will be looking for more clues before committing client capital.
o We’re just above the PLOD and the PHOD is all the way up around 114.14
o This tell us to be bullish in nature today, we are at the lows of the previous range and we expect the market will TRY to test the highs of the range.
o This means the higher % trades will be buying pullbacks, using support to buy as prices are rising.
o Major levels above us are the OPEN, the HOD at 113.09, and then 114.14 the PHOD are all major levels of resistance overhead we will use to sell first, and then with rising prices will buy pullbacks above them.
o Major support below us is the lows of the wedge at 111.00 but beware this is a big round number so trade with caution
o We also have the PLOD below us as support, but at this point in the morning we are going to use this PLOD as a level that tell us SENTIMENT.

 Example: are we above or below the PLOD? We may not be able to use this as a major level of support to enter/exit trades.

o The Big Money Trigger Line is another big Red flag that we need to be patient this morning. The BMT is right at 112.34 right where we are trading at this time.

 We don’t like to enter trades around the BMT, we would rather have your profit target at the BMT.

– With that said, our plan of attack on Crude Oil Today will be as follows:

o We will look for more volume around 830am (right now)
o We will buy the lows and sell the highs of the sideways ranges marked in white boxes
o Buy the lows and sell the highs of the Price Channel marked in Pink trend lines
o Buy the lows and sell the highs of the price wedge in the blue trend lines
o We will be buying above the PLOD, and then look to sell the PHOD as resistance
o If price rises we will look for buying opportunities using pullbacks, keeping an eye out for the OPEN at 112.80 but trying to buy the lows of the price channel around 112.75
o I will also look to sell the HOD at 113.09 as price rises, and then look to buy pullbacks with new higher highs
o I will not buy the highs, I will buy pullbacks
o If prices fall I’m looking to buy the PLOD as support, and buy support levels of 112.0 and 111.00 on the way down.
o If prices fall we assume we will try and enter into the short term bearish trend it was in earlier this morning, so im looking to sell new lows with a retracement.
o I will not sell the lows, I will wait to sell a retracement
o I also know that around the BMT I will need to be very careful, so patience may be the best trade I can take.

Let’s review the Gold Futures today, start with your 89range chart:

– Strong Bullish Price Channel
– Sideways Range(s) off the highs of this price channel
– Bullish Price Wedge in bleu trend lines now that we have a lower high from last week’s higher highs
– Now with the most important price levels located on my 89range, lets plan our attack with the exact price levels on our 34range chart

o There is no dollar trend, so there is no directional bias from the DX
o We want to sell the highs and buy the lows of the price wedge.
o Notice the wedge on the gold is very narrow, almost the end of the wedge. This is very different than the wide range wedge we have on crude oil today.
o We will keep an eye on the sideways ranges, selling the highs and buying the lows of the white boxes that were drawn and carried over to the 34range chart
o We are in a bullish price channel from the 89range, so we will use as our guide throughout the morning
o We have the PHOD above us, the PLOD is below us, making this an INSIDE trading day

 Inside days = sell the highs and buy the lows (don’t expect to see the big moves outside of the range)
 This can change, but this is what we assume at first will be the best options for our trades.

o With this new information, lets plan our attack today:

 There is no dollar trend, so there is no dollar directional bias
 We have a bullish sentiment from the bullish price channel, so use that as your guide today.
 Long trades may be the higher % if taken at the correct times.
 If prices rise:

• Selling the highs of the wedge, selling the highs of the range and as prices rises im always looking to sell first, and then buy a pullback with new higher highs

• Im looking to sell the major levels of resistance which are 58.5, 61.3, 65.8, 67.8, and then all the way up to 77.4

 If prices fall:

• Im going to beware trading around the open of the day, it will be sloppy
• Im buying first as price drops at levels of support, and then with new lows we will sell retracements, never selling the lows
• Im buying at support at 47.4, 43.0, 40.3, 36.1, 32.1, and 25.0 which is the low of the lowest part of the range.

950am est

– We’ve had a very easy morning so far
– The day started slowly, so we took our time and planned our attack
– We then traded our plan and took 3 winners for $1000 on crude oil this morning
– We also have a new plan of attack on crude oil because it now fulfilled its plan from 745am est
– Lets plan our attack on crude oil this morning:

– Open your 89range chart and you see the following:

o Sideways Ranges: We are just above the Highs
o Price Channel: In the middle
o Price Wedge: Just above the Highs
o Using this information, we now zoom in on a fast timeframe and look for the exact price levels
o Open our 34range chart and we see the following:

 RIGHT AWAY, VERY IMPORTANT we see the dollar has NOT made a comparable move to the same move we saw on crude oil

 The dollar will move the markets, not the other way around
 Dollar stays flat and crude oil jumps, we have to assume, without any major fear in the market, this price will come back to the pre-move levels
 We need to use this to our advantage
 We aren’t going to sell short NOW, we will wait to sell at resistance, selling retracements.
 We want to sell the highs of the same price wedge we bought the lows of earlier this morning, we expect to take profit at the LOWS of this wedge, looking fro support levels on the way down for easy profit targets.
 PHOD is below us, as well as the major trading range, so we assume this will act like a price magnet.
 We want to buy the PHOD as support when price comes back down.
 We expect will try to come back down, but at the same time we NEVER ignore any direction on crude oil
 If price rises:
 Im selling resistance first, and then buying pullbacks
 Im selling the major levels of resistance which are the highs of the channel at 115.00 (great target)
 If we break above 115.00 we will have no choice but to keep buying pullbacks, but make sure momentum Is confirming with increasing speed.

 If prices fall:

• im buying at support levels firs,t then selling retracements with new lower lows
• im buying major support at the PHOD 114.14, 114.00, beware trading around the OPEN 113.89
• buying support 113.73, .50 is the low of the new minor channel, and 113.00 is the low of the major channel
• beware trading around the 112.80 and around the BMT 112.49, both of those levels are in the middle of the ranges and will be assumable very sloppy

1015am est

– we have crude oil at the highs and when the dollar now tumbles and the Crude 06-11 does not rise with it, we now know the crude oil is not trading with the dollar correlation.

1030AM est

– we saw a double top at the HOD and this told as buying the PHOD was a VERY high % trade
– we took the first test of the PHOD and got +5/-5 for scratch
– we know the buying opportunity at the PHOD is a VERY high % trade, and then we notice this is ALSO a wave long on the 21r
– this is now 2 high % trades that are very rough and sloppy
– its clear the market on crude oil wants to test the HOD
– we just cant find an easy way to get in, without a lot of risk, and have a high % entry
– this tells us after taking 2 swings at that trade the personality has changed and we now need to wait for new higher highs and let this crude oil work itself out.

1033am est

– we see the market’ personality change drastically
– we are no longer seeing the big bold moves with extension and follow through
– we need to trust our opinion of this personality and use caution
– trade smaller size, use a demo account, be more careful, look for double confirmation, or simply wait until we see

1100am est

– we hear news chatter regarding possible supply concerns on crude oil.
– We assume price will try and rise, but it has not YET
– This may change, but this is definitely telling us something
– Lets look for the SELL SIDE instead

Daily Wrap:

– Goal of the ‘wrap’ is to see if we used the plan we defined @ 745am
– It will help us to learn from our mistakes, and to keep learning new ways to make profit from the markets.

Crude Oil:

– 745am this morning we wanted to buy pullbacks with new highs
– We also said look for resistance at the PHOD
– What did we do?
– We bought pullbacks on the way off the lows with new highs
– We then later in the morning bought the PHOD as support and took a scratch, even though it was according to our plan, this is good.

Gold Futures:

– Buy the lows and sell the highs of the sideways range, wedge, channel
– Trading both directions ok
– Inside day = sell the highs and buy the lows
– What actually happened?
– Our first trade was a scratch, that was against our plan of attack (the dollar was dropping, so we got long instead)
– We went against our plan once and took a +5/-5 and then got into again when we saw the big money buyers in control for our biggest winner of the day.