June 15, 2011
- in Uncategorized by schooloftrade
Crude Oil Revenge Trade cost me 50 ticks, don’t make this mistake tomorrow
We begin our day with the US Dollar Index, which is seeing lots of buyers this morning after news out of Europe contributed to the fear of buying the Euro.
Our 13range chart shows the strong bull price channel, which tells us price should be rising today. However, we also know that we are at the highs of the range, we have the 89range BMT at 75.620 which will likely mean the dollar will stall and reverse.
There are three scenarios today on the US Dollar Index:
1. The dollar keeps rising to the highs of the channel around 75.800
2. The dollar stalls at 75.620 and trades sloppy and sideways, trying to find more direction.
3. The dollar reverses off these highs, feeling the selling pressure to bring it back down into the range below it, below 75.300 into the transitional area below.
We then have a very simple plan of attach using the Dollar Index Futures:
· If the dollar rises I’m selling retracements and selling at resistance with the markets I trade.
· If the dollar trades sideways I will then look to trade INSIDE the range we are in on the markets I trade.
· If the dollar drops to new lower lows I will be looking to buy at support and buy pullbacks with higher highs.
830am est
We have three news events…
· Empire State Manufacturing Survey comes out much lower than expected. (sector is slowing down for 3 months now)
· Consumer price index came out higher than expected (rising costs = inflation)
· Manufacturing Sales in Canada are the same as expected, stable.
Now let’s review the Crude Oil Futures today, and remember the 3 phases of crude oil inventories today.
We see an INSIDE DAY on the 07-11 Crude Oil contract, above the previous lows and below the previous highs.
Open and BMT are above me which will act like a price magnet.
The no trade zone, 100.00 big round number and the 89range BMT are also above us, which will also be a price magnet.
We see two distinct price channels, 1 bear and 1 bull.
We recently broke new lows below the bull price channel and can see a short term bear channel has developed.
We also notice the 08-11 contract is starting to ‘steal’ some of our volume on the 07-11 contract.
This tells us a few things…people may be exiting the current month early to push out the fear of the unknown.
My plan of attack on crude oil this morning:
– Inside day means Im looking to trade inside the range we are in. Avoid the fake-out breakouts. Sell the highs, buy the lows, avoid the middles.
– We have inventories, so I will not be trading after 1015am est today, and will wait till after 1035am to enter the market.
– Bear price channel says to keep selling new lower lows with retracements
– However, the inside day tells us to be careful with trading the breakouts.
– Slight bearish bias, but very selective with the breakout trades we take.
– If price falls im buying at support first, and then selling retracements on the way down.
– If price rises im selling at resistance first, and then buying pullbacks on the way up.
– Never buy the highs
– Never sell the lows
More specifically:
If price rises im selling 99.00, buying pullbacks above 99.10
I’m selling the highs of the wedge around 99.20, selling the PHOD at 99.69, and avoid the no trade zone above it.
If price falls I’m buying support at 98.20, I’m being very careful around 98.00 (we saw this last week and confirmed again very sloppy on Tuesday)
As prices keep falling I’m buying support at 97.83, 97.40, and 97.10. buying the support first (inside day) and then with new lower lows that support becomes resistance and we sell retracements using that resistance.
850am est
We take our first trade of the day on crude oil and the market clearly lacks any personality at this time.
Better to wait for the market to begin to move with consistency.
We also notice that ALL big money trigger lines are on top of each other. 34r, 21r, 13r, 4r, are all relatively close. This confirms that price on crude has been ‘flat’ for many days consecutively.
900am est
We have long term tic flows come out lower than expected, meaning that fewer people see value in US debt (notes and bonds) We assume that’s because a month ago the dollar was in a tailspin, and now the dollar is back rising again so this number should improve.
We now review Gold Futures
89range chart shows us a wedge inside of a wedge, so we will watch for price entering the smaller wedge above 1528.5
Sideways range(s) from 1528.5 down to 1513.0 and additional ranges from 1533.5 down to 1511.5
We see the BMT is below us which will be a price magnet.
Inside a bear price channel and just above the lows.
Now lets use our 34range chart to plan our attack more precisely.
We see sideways ranges on gold as it attempts to transition from bear channel to bull channel.
Inside day on gold means sell the highs and buy the lows, avoid the fake-out breakout.
BMT and the PHOD are above us, which will be a price magnet.
Inside a bear price channel, and towards the highs.
Inside a sideways range and in the middle.
Inside the MAJOR price wedge, and near the lows.
Lets plan our attack on gold futures today:
If price rises I’m selling resistance first (inside day) and then with new higher highs I will then buy a pullback.
As price rises I’m selling the channel highs at 1525.0, selling the PHOD at 1529.0, and avoid the BMT at 1529.5
If we make new higher highs I will then buy pullbacks above 1530.4 and sell the highs of that range at 1533.4.
More locations to sell overhead (or take profit) will be at 1534.8, 1537.5, and 1539.4
If prices fall im buying at support first (inside day) and then selling new lower lows with retracements.
If price falls I’m buying 1516.6 support, and then the LOD at 1514.5 and the PLOD at 1512.8, and then buying 1511.4 as the range lows.
More support levels to buy (or take profit) will be 1508.4 and 1504.4, 1500 is the low of the major bull price channel.
915am est
Industrial Production news comes out as expected
So far today the only news out of expectations was the manufacturing survey.
945am est
Dollar is dropping off the new highs, which means we now consider buying pullbacks if we make new higher highs.
The key is the OUTSIDE day on Gold. Above the PHOD on Gold we now have the DX dropping so we look to buy pullbacks,.
Crude Oil is not outside day yet, so we still want to avoid the fake-out breakout.
1000am est
The crude market has been very sloppy all morning, making us work hard for any ticks of profit.
We need to beware the 2nd phase of crude oil is now after 10am.
I don’t want to trade crude oil after 1015am est today, that will be too close to the 1030am news.
Lets re-focus our plan of attack since this market has been busy but very challenging.
Crude oil is still inside day, so sell the highs and buy the lows.
Sell the Highs of the major price wedge off the 89range.
Dollar is dropping, so with new higher highs we can buy pullbacks, but they will be assumed higher risk (inside day)
Avoid trading around the OPEN and avoid trading after 1015am est, wait for the news after 1035am.
1040am est
We waited for 1035 and took the trade long on falling inventories with no success.
With the long entry failing we then get in short once price breaks below the 99 big round number and the 34r trigger line as support.
Nothing moving with any consistency at this time, so we need to be patient.
We will get some easy price action today, its just a matter time, but we NOT be able to keep from over-trading so be more selective with the trades we take going to into 11am EST.
Lets review our plan of attack going into 11am est.
Be selective on crude oil, no room for another loss today.
Wait for new highs above the wedge highs to confirm a long position because of the inside day.
The dollar looks like it could rise OR fall, so we cant use that as a strong bias ….not yet.
We think the crude oil is bullish because of the inventories, but it still needs to PROVE this to us.
We’re at the highs of the wedge, so we want to sell these highs, but the 34r and 89r support levels around 98.50 have been almost impossible to break.
Lots of support just below the highs will make selling the highs more challenging.
We appear to be trapped between the wedge highs of 99.20 and the Bull Channel Lows at 98.90
If price rises on crude oil I need to make sure we are above the HOD of 99.28.
I will be looking to sell these highs first, and then look for the pullback with new higher highs.
If we keep going im buying pullbacks as highs as 99.50 and then look to take profit at the resistance of 99.69 which is also a price magnet, the PHOD.
I will then sell the PHOD 99.69 if we don’t see momentum and speed confirming for new highs.
Buy pullbacks above 99.69 into the no trade zone, taking profit just before the 100.00 big round number.
99.64 is the target and the 89r bmt
1110am est
We followed our plan on crude oil and made a bunch of profit buying a pullback above the PHOD and then with new higher highs we bought pullbacks before we got into the no trade zone above 99.85.
Now the dollar is confirmed trading sideways, so there is no longer a directional bias.
Crude and Gold are also trading sideways into the 1130am European close.
We will continue to look for buying opportunities above the PHOD, outside day
