April 18, 2011
Patience pays well day trading gold and crude oil futures
830am est
– We know the Jewish Holiday of Passover is Tuesday and Wednesday this week
– Check the dollar index first, this will give us clues to the market’s personality today
– Average true range: atr on the 06-11is rising, higher lows, and potentially higher highs.
– This tells us to be open to good price action today
– Speed is very slow this Monday morning without any news
– We open the 34range chart on the dollar index and we see the following:
o Bearish price channel
o Sideways range
o Big money trigger line overhead resistance @ 76.000
– If you look at the previous moves on the dollar index you notice a very simple patter
o New lower lows
o Sideways range for a few days
o Then retrace up to the BMT Line
– Where are we now?
o We made lower lows last week
o We traded sideways last week
o Now we see the BMT is overhead with room for price to rise
– So we can only assume the price on the dollar will try to rise up to the BMT at 76.000
– The negative correlation tells us rising dollar should result in falling prices on the markets we trade most
– Selling crude oil, gold, Russell, euro, es, etc, when the dollar is rising
– There is ONE TIME when this correlation breaks down and no longer works with consistency….when we have LOW VOLUME
– So when I see RED PACE OF TAPE and sluggish price action on a Monday without much news, and a potential holiday that may suck the volume out of this morning, we need to be patient.
– One thing is for sure, if the low volume keeps the correlation WEAK today, we can still look at the BIG PICTURE and a rising dollar = selling opportunities on the markets we trade.
900am est
– We now check the crude oil futures
– The 89range chart on 06-11 contract shows the following
o Strong wedge pattern and we are in the middle of the wedge
o Sideways range from 110.58 down to 107.68
o We mark up the most obvious levels on the 89r chart and now move to the 34range.
915am est
– We now use the 34range on crude oil to make educated decisions on WHERE to enter and exit trades
– We see a price wedge, and the price wedge tells us to do the following
Lets plan our attack on crude oil:
– Price wedge we are in the middle of the wedge, so we know this is the highest risk area we can be trading in today.
– If price rises:
o Im selling first, and then buying second
o Selling 109.74, 110, 110.14, 110, 43, 110.58, and 111.0
o As price breaks overhead resistance I will then look to buy pullbacks
o I never buy the highs without serious compensating factors
– If price falls
o Im buying first, selling second
o Im buying support levels of 107.66, 107.51, 107.21, 107.00, 106.68 and 106.00, 105.77 is the lows of the range
o As prices drop im selling retracements as we break new lower lows, never selling at the lows
o We don’t sell into support
925am est
– We’re getting to know the crude oil much better this morning.
– We noticed the 13range double top was not confirmed to re-test the highs and now we thing the prices will keep dropping.
– If the dollar can rise back up, and the crude makes new lows we may see the lows of this wedge pattern tested very soon.
935am est
– We open the 89range chart on gold futures and we see the following:
– Strong bullish channel inside of the wider bullish channel
– We see a sideways range and we are the highs of the sideways range
1005AM est
– We sold the highs on gold for 2 winners, and even grabbed 2 HR FT Winners off the highs
– We’re seeing new highs on gold, so we continue to try and sell the highs.
– Don’t forget, we can also buy pullbacks, but we know from experience that the all time highs on gold are tough to buy.
1010am est
– We open the 34range on crude oil and we see the big drop at 955am has now left crude at the lows of the channel and the lows of the wedge
– This looks a LOT better than it did at 8am est today in the MIDDLE of the wedge
– Buy the lows of the channel
– Buy the lows of the wedge
– Beware the 107.00, it looks like that may be a final resting place for a sideways and tired crude oil market.
