January 20, 2011
- in Uncategorized by schooloftrade
Day Trading Crude Oil Inventories News almost took all my profit!
– Members Training is posted from Wednesday
– I’m working on a LOT of new videos for the Advanced Course this week, so stay tuned for more!
800am EST
We begin looking at the dollar index this morning and we the narrow wedge pattern has the DX going sideways.
What happened?
Dollar broke new lows, but got stuck at the trend line support below the price channel
Now the dollar is looking for direction…does it go back up into the price channel? Or does it continue to break new lows?
We need to wait and see where the price on the dollar goes next.
Check the vital signs of the dollar:
Average true range: higher lows on the ATR (not higher highs unfortunately) tell us that we have a positive outlook for the dollar today.
Speed: speed of the tape looks really slow, but this is early and this can change quickly, so pay attention to the speed.
825am est
– The gold and the crude oil futures drop off their highs and test new lows.
– At the same time the dollar bounced off the lows of the very narrow wedge pattern we see on the 34range chart.
– What happened?
– Dollar rises = everything falls
– We don’t however expect the crude or the gold or anything else to move very far past new lows until the dollar moves as well.
– Expect sideways ranges when the dollar is sideways.
830am est
– Crude oil just fell off the new highs on the daily chart
– Look to buy levels of support now that we missed selling the highs
915am est
– We had 830am news that came out with lower than expected jobless claims
– Lower jobless claims = bullish for the dollar = bearish for everything else
– Price began to drop to new lows when the dollar rises
– We saw new lows on gold and crude, but we were patient and waited to sell the retracement and NOT getting over anxious and selling the new lows.
– There were plenty of opportunities to take losses by selling the lows, we sold the bounce off the lows with a retracement and the wave pattern.
– Then at the new lows once we saw price start to slow down, support starts to hold, we then BUY the lows
– We did a great job at deciding what the BEST use of our trades were…
o Don’t sell the lows
o Don’t sell with momentum oversold (buy instead)
o We were aware of our FINAL TARGETS and we didn’t get greedy.
o I got greedy on 1 of the gold trades and I lost my final target because of it.
– Now at 915am est we wait for the 930am US OPEN and we see how the opening drive looks for patterns.
935am est
– We have the crude oil testing new lows, and we see strong support at the BRN of 89.00
– Look to buy the lows of 89.00
– And im going to wait patiently to see if the price will test the lows of the sideways range down to 89.00
955am est
– We’re waiting for the news to come out at 10am, 1030, and then 11am for crude oil
– The market’s personality is MUCH different than it was an hour ago
– Before 930am we had lots of speed, moving price, and we had lots of trading opportunities.
– Now we sit sideways and quiet, slowing speed, going sideways.
– Lets be careful not to FORCE any trades simply because we want something to happen.
– Look at the news, see what the market reaction is and trade accordingly.
1000am est
– Gold futures dropped like a rock before 930am and now trading in a very narrow and consolidated trading range.
– At the lows im looking for buying opportunities, but lets use a faster timeframe to plan our patterns.
1005am est
– 1000am news comes out as expected, which means the markets have most likely already priced this move into today’s range.
– When the news comes out higher/lower than expected that when the markets move with more volume and give us trading opportunities.
1015am est
– We see crude oil inventories are scheduled for today @ 11am est
– We usually have this news on Wednesday @ 1030 but with the Monday holiday we have it today
– The crude personality will tend to change ahead of the news, and then will change again after the news
– The key is: does the news come out as expected? If the news is within range expect the crude oil stay quiet after the news
– If the news is unexpected then we should see a dramatic improvement in the speed and volume and opportunities to day trade.
– WE Take the 21range wave short on the crude oil
– We get in with the 21 momentum curling down
– We can play it safe by waiting for entry below the support level (trigger Line) on the 13r chart (49)
– So two entry options, 1 more conservative then the first.
– We manage our trade with a standard first 2 targets (+5 and +10) and then we place our final target based on the support and resistance we see in the market.
– For this trade we see the LOD at 89.20 so we take profit above the LOD by 5 ticks at 89.25
– What am I looking for while I manage my trade?
o Speed: when speed slows down, look to cover this short, take profit
o Momentum: when momentum curls against me, I need to take profit
o MACD: when the macd is RED I will hold the short trade, and when the macd is green I will cover my short trade (take profit)
1030am est
– Nat gas inventories are important, but not THAT important.
– How do we know when to be careful after a news event?
– Watch the dollar
– If the dollar moves after the release of the news you know that the markets are going to react.
– If the dollar does NOT move you can expect the price to have already accounted for the anticipated news information.
1050am est
– We’re seeing crude oil slow down dramatically ahead of the 11am inventory news
– We want to be prepared for the market reaction to the news, but we cant before we SEE the reaction./
– Wait for 11am and see the reaction, then draw my trend lines, plan my trades, and then trade my plan.
– We’ve had a great day so far, lets wait patiently and trade with our rules.
1100am est
– We see crude oil inventories HIGHER than expected, outside of expectations, so the market will most likely react.
– Question?
– Are the inventories rising on heavy demand which lead to increased production? Or due to lack of demand and inventories are piling up?
– We took 2 trades after the news release:
– Buyers were in control so I bought the breakout and got stopped out. 21r momentum did not confirm
– 2nd trade we used a wave pattern to get back in and took 10 ticks of profit out of this sluggish move up.
– What did we learn?
– Following our rules would have kept me OUT of the loss
– Following my rules would have kept me in on the 2nd trade and got another target filled.
– NOT following rules cost me more money than the stop loss.
