February 9, 2011
Technical and Fundamental Analysis day trading crude oil inventories news
845am est
– The dollar index futures are trading in a wedge pattern at the highs of the bearish price channel
– The wedge pattern is easy, sell the highs and buy the lows, and avoid the middle
– The longer we stay in this wedge, the more narrow the price gets on the DX
– Narrow dollar = narrow everything else we want to trade.
– We want to see the dollar test the highs or the lows to give us the best trade opportunities.
– We do NOT need the dollar to break out.
– Simply dropping from the highs is the same as making new lows in many situations. (dollar drops)
– The average true range on the dollar is making HIGHER LOWS, which tells us the price is getting WIDER, easy way to profit
900am est
– We have watch the crude oil carefully ahead of the 1030am news
– Last Wednesday we had a HUGE day on crude oil, so we never know
– The market personality is going to develop today from 900am open, 1030am news, and then AFTER the news we watch the market reaction.
– We sold the highs of the day using the 4range chart 2step short pattern and took profit at 87.50 area on the 13range trigger line.
– We now are looking to sell the highs on the 13r and 21range charts but we see oversold momentum, lots of support around the open of 87.38 so we have to wait.
– I would rather BUY this support than try to sell against oversold momentum
925am est
– We wait for the US market openat 930am est
– We took our 2nd and third winning trades today before 930am
– Very slow and very inconsistent with the speed of the market and the big money on the tape
– So we’re seeing the pattern develop, but then speed and momentum and big money are having a hard time confirming the entry,.
– We need to look for double confirmation on crude oil now that we see the market personality ahead of the crude news @ 1030am
940am est
– The dollar making new lows
– The euro is rising
– The gold is rising
– Tells us to trust the dollar correlation
– There are 2 times when you cannot trust the correlation.
950AM est
– We take the 21range chart wave short on the CL 03-11 and get a scratch
– We got in with less than desireable speed and the market couldn’t get the move to test the lows and fill our targets.
– We quickly now see the crude oil and the gold markets personality VERY concering.
– Notice how price is getting sucked back up into the center of this trading range.
– Almost like traders are concerned over the long term direction in price.
– Most likely waiting for 10am Ben Bernanke
– Most likely waiting on crude for the 1030am news.
955am est
– We’re waiting for better speed and more movement out of this very narrow trading range on the markets we’re trading today
– The dollar is making new lows
– The dollar is testing the lows of the price wedge
– We don’t need to see new lows on the dollar, we just need to see prices rising off the lows (rising dollar = selling opportunities)
– If the dollar keeps making new lows, we expect other markets to RISE.
– We often times use the correlation the wrong way.
– “The dollar has dropped, so I need to buy” (WRONG WAY TO USE IT, this is in the PAST)
– “The dollar is dropping, im looking for buying opportunities with every new lower low” (CORRECT WAY TO USE IT, uses the REAL TIME move on the DX)
– Make sure we watch the most recent price action on the dollar, not what happened in the past.
1010am est
– We take the breaker pattern long breaking out above the wedge pattern strictly on the reaction to benranke’s speech
– We watch the dollar sell off so we waited for big buyers on crude oil, and bought according to our rules.
– We looked for numerous different options for our final target, all outlined on the morning prep on the blog, but then we saw things that made us get out early.
– Three things told us to flatten the long trade and take profit
1045am est
– Crude oil inventories came our higher than expected
– The initial reaction was filled with BUYERS, but we followed our rules, we stayed away from buying the highs and waited for the market’s long term reaction.
– Crude inventories came out HIGHER than expected, so rising prices were NOT the assumed reaction.
– Combine that with overbought momentum and not watching to buy into the highs and it made it easy for us to wait patiently.
– We see inventory rise, we see overbought momentum, and we are at the highs.
– So we looked for the short.
– We took the first trade short using a 2step pattern on the 4range chart
– We then took profit at the next level of support and got out of the market.
– We waited for price to break the MAJOR support levels of 21range and 34range trigger lines
– Once we broke the final MAJOR SUPPORT on the 34 range trigger line, all we need was our rules to confirm the entry short.
– I got a little greedy on the entry short because we were hoping that the crude oil would drop like a rock after the news.
1100am est
– 11am is the time when we look for lunch to settle in
– We saw 1030am crude oil inventories higher than expected (gasoline) so we expected falling prices for the BIG PICTURE.
– (this doesn’t mean I cant buy, but the higher % move will be short)
– We’re expecting price to drop after reading the news.
– We took a wave pattern short on the 13range chart and take profit very conservatively at the next level of support
– Price broke through the support, so we think the sellers are still in control
– We see some opportunity to buy the lows, but momentum wont line up perfectly for it.
– We decide to wait for the next short trade
– We enter short again with a wave pattern on the 13range chart, taking profit at the LOD
– We waited for the market’s reaction on crude oil, and we used that FUNDAMENTAL reaction to news, along with our TECHNICAL ANALYSIS of the momentum, speed, and price ranges (support/resistance)
1115am est
– We notice the dollar index is trading off the lows and now testing the lows of the wedge.
– When the dollar broke the wedge we got GREAT price action
– When the dollar re-enters the wedge, we expect the price action to become more narrow, slower speed, lack of big money, etc.
– After 11am est we need to be careful that lunch may be upon us.
– Remember we will have more volume @ 1130am est with the euro close, so be patient and wait for this price to give us a great patterns.
