February 8, 2011

Day Trading Morning Prep Gold, Crude Oil, Dollar Index, Euro, E-mini Russell Futures

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Let’s begin our morning routine with the economic news for today’s trading session.
8:20 Gold & Currencies OPEN
9:00 Crude Oil OPEN
9:30 US Market OPEN
10:30 E-mini Reversal
11:00 Transition into Lunch
11:30 European Close / Live Webinar in our Trade Room
We dont see much for news today, treasary sale at 11am today, and looks like people will be waiting to see what Ben Bernanke says in his testimony in front of the house tomorrow (wed) @ 10am EST.
Look for today’s movement based on outside influeces such as the dollar and foreign concerns over the economy.
Lets take a look at our charts today…

Dollar Index Futures
We can see a well defined bullish price channel on this DX 03-11 34-range chart.  We can draw yellow trend lines off the highs, and then copy and past the trend line to the lows to define the price channel.
We wont be trading the dollar, we use it for the Dollar Index Futures Correlation to tell us which direction to trade on OTHER Markets.
The dollar is at the highs of the price channel, so we expect price to continue to drop.
Dropping dollar = rising prices on Gold, Crude Oil, Euro, Russell, etc
We will pay close attention to the dollar index this morning as it makes its way down from recent highs all the way to the lows of the channel.
Crude Oil Futures
Crude Oil prices have dropped significantly off the highs from last week, all the way down to test the MAJOR support trend line around 89.60. 
This now creates the lows of a massive Wedge Pattern, so now we have a few options to chose from when trading crude oil today:
1. Price May keep dropping
2. Price may now go sideways
3. Price may now rise back up
Seeing that price stopped at the major trend line support around 86.00 we expect prices will try to rise back up off the lows of this wedge first.
Im looking to buy levels of support as price rises back up.  Looking to buy 86.00, 87.00, and 88.00 on the way back up.
If prices drop im still looking for buying opportunities even if we drop to major support of 85.00, and even lowerer to 83.00.
Prices dropping through the lows of a wedge pattern are always great buying opportunities at support levels.
I will look to sell at the breaks of support, but look to use a retracement for the selling opportunities.
In other words, use wave patterns, rather than breaker patterns to trade new lower lows.
Use 2 step longs and wave long patterns to buy at support and move this price back up off the lows of the trading wedge.
Gold Futures

Unlike the crude oil, the 04-11 of Gold is in a much tigher trading range, and still trading sideways from late last week.

The narrowing channel on the dollar is surely affecting this gold market as well, which clearly shows us the concerns of security of the global markets.  Lack of fear keeps the prices down, but overall fear continues to have the gold markets flirting with new highs.

so how do we trade  Wedge Pattern?

Buy the lows, sell the highs, and avoid the middle

The key is to avoid the middle of the wedge, and look for price to test the highs or the lows, or even look for a breakout.

The key to a wedge breakout is to look for the right situation:

If price breaks new highs I will  Buy a Pullback at support
If price breaks new lows I will  Sell a Retracement at resistance
Look to sell the highs and buy the lows FIRST, but if price wants to break the wedge be careful not to get greedy, wait for the pullback or the retrace and use that for your entry.
Euro Currency Futures

The Euro is trading in a wide price channel (pink) but we can see a price wedge forming with the most recent trend line from the highs in yellow.

The price channel means that buying at support will be the better trades for today, but beware trading long into overhead resistance such as the highs of the wedge or the channel.

E-mini Russell Futures

No guidance today

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