Market Content August 21, 2009

Well another summer Friday has passed us by, and we are happy to see it go! Volume still isn’t at the level we would like to see it at in the market, but that doesn’t mean we can’t trade. In a low volume environment like we have in the month of August it is crucial to practice patience and discipline, which is at the core of the School of Trade’s education. Here are the trades we took today…..

We started our morning off with a nice trade on the Crude Oil market (Symbol CL). We noticed some increasing volume using our new Pace of the Tape indicator around 8:45am EST and started watching the Crude Oil more closely going into the open of the open outcry pits at 9:00am EST. With the open of the crude market, we notice it quickly sold off early, but then started to reverse, and we then knew to look for our 2-step trend reversal trade. At 9:04am EST we entered the Crude Oil long at a basis of 73.97, we entered at this price because we had to make sure price action would trade through one of our dynamic price levels at 73.94. Once we saw this occur we entered long and quickly got our first target of+3 ticks (2contracts) before getting scratched out of the remaining 2 contacts of our trade for a total of 6 ticks ($10/tick).

Our next trade of the morning came on the Crude Oil once again (Symbol CL). We had to wait for the opening of the U.S equities market as well as the U.S July Existing Home Sales number to be released before taking any trades. Once all of the news had been released, we looked to take some more trades. We ended up seeing strong volume starting to reverse the Crude Oil, and looked to enter the market long with a 2-step. At 10:14am EST we entered long with a basis of 74.40 after price action had broken a dynamic level of resistance at 74.37. Our new Pace of the Tape (POT) indicator was our saving grace on this trade, we actually closed out of this trade early because the POT went from green to yellow, indicating that there was a slow down in price action to the long side, so instead of taking a full 6 tick stop, we closed our trade with a -4 tick loss (4 contracts), totaling -16 ticks on the trade ($10/tick).

Shortly after our loss in the Crude Oil market, we notice a strong increase in green POT bars on the Euro futures (Symbol 6E), identifying for us an increase in volume and possible trade setting up. The Euro had been trending to the short side since the open of the U.S markets, and so we looked to take a reversal in the form of a 2-step. At 10:29am EST we entered the Euro futures long with a basis of 1.4316, we quickly noticed an increase in the speed of the tape, which filled our first target of +3 ticks (2 contracts) before the market quickly reversed back to our entry level and scratched us out of the remaining trade, for a total of 6 ticks ($10/tick).

The final trade of the day came once again on the Crude Oil (Symbol CL). The Crude Oil market had been making some significant price swings throughout the day, from the 72.00 level upwards to 75.00 and back again, during its swing to the short side, we notice volume was slowing down and buyers looked to be taking it back to the long side. So, at 10:37am EST we entered long in the form of a 2-step pattern, with a basis of 74.12. Once in the trade we continued to read the price action across the tape to see if there was any real follow through to the upside, we quickly got our first target of +3 ticks (2 contracts) and then after noticing price action slowdown via our POT indicator, we took profit manually at another +3 ticks before getting scratched out for a total of +9 ticks on the trade ($10/tick).

Today’s Trade Total’s 3 for 4 $65.00 in profit