January 24, 2011
- in Uncategorized by schooloftrade
Day Trading Morning Prep Gold, Crude Oil, Dollar Index, Euro, E-mini Russell Futures
Let’s begin our morning routine with the economic news for today’s trading session.
No Economic News scheduled for today, Monday January 24, 2011
Looking at our calendar of important news for this week we can see that we have important news on Wednesday(FOMC) and Friday (GDP) this week.
With important news on Wednesday and Friday we will expect to see some traders sitting on their hands waiting for this information to be released, so we will be discussing how and when this will impact the markets in our trade room this morning.
With our news under control, lets take a look at the futures markets we will be day trading today.
We recall that last week the dollar was trading sideways just tucked underneath the lows of the price channel above us, and the a trend line acting as support below us.
Well, the dollar is still trading in this narrow range this morning, and with the news of FOMC and GDP coming out later this week I don’t need a crystal ball to read the minds of the traders on the dollar.
Think about this…if you were a major money manager would you be making big decisions with your client’s money this week BEFORE or AFTER the BIG news on Wednesday and Friday?
Correct, you would wait to see the news first, so this is why we expect to see the dollar perhaps a little sluggish early this week while we wait to see how this market reacts to news.
Notice on the 34range chart of the dollar that we have the range above 79.000 and the dollar is still trading sideways, using 78.275 as support and the lows of the price range (79.000) as overhead resistance.
I draw a trend line from the highs and then from the lows to complete the proper support and resistance on this chart, and my auto levels indicator finds all the major levels of support and resistance at specific price levels.
Crude Oil Futures
Crude oil looks very active this morning, so im excited to see how today looks once we get started.
Using my 34-range chart I can see that we have broken below the trend lines acting as support around 89.00.
We can now clearly see a sideways price range from 88.00 up to 89.00 so I would look for three different scenarios from crude oil:
– Price rises back up
– Price goes sideways
– Price drops
If price rises back up im looking to sell the highs of 89.00 and take profit on the short back at the lows of the range around 88.00.
If price rises I will also look to buy at support above 89.00, taking profit long at 89.63.
If price goes sideways only day traders and scalpers will trade this market today, so keep an eye on sideways ranges this morning if the dollar stays flat.
Buy the lows, sell the highs, and avoid the middle is how we trade a sideways market.
If the market drops, im looking to buy at levels of support on the way down (88.13, 88.00, and even 87.35 if price drops that much)
Using momentum, im looking for oversold momentum at support levels for buying opportunities, and on the opposite side of that im looking to sell the break of support (turns into resistance) when I see good speed and aggressive selling when we approach support levels as price drops.
Gold seems to have itself stuck in the mud somehow this morning tucked between two major trend lines as support.
The two major trend lines in yellow are from the Swing Low way back to October 30th, so they go very far back to get these support levels.
This tells us a LOT about what is on the minds of gold traders this morning.
Why would you allow the gold price to quietly rest on this weak support from such a long time ago?
Simple. You’re concerned over the direction of the dollar (which will affect gold) so you are most likely going to wait for the dollar to react FIRST, and then the gold will react to the dollar.
So we have a narrow Wedge Pattern formed on this 34-range chart, and we know exactly what to look for:
– The dollar moving will be the biggest heads up for when the gold will move out of this narrow range.
– Sell the highs of the wedge
– Buy the lows of the wedge
– Avoid the middle of the wedge.
I’m going to review the many ways we can buy these lows and sell the highs in our live trade room this morning.
We can see the euro continues to react to the choppy dollar price action with this horseshoe price pattern.
We came all the way down off the highs of 1.4000 from last November and now we are trying to make our way back to the upside.
This price pattern (moving back up) is making for a nasty set of trend lines creating what we call a horseshoe pattern.
We need to watch trend lines coming from overhead as resistance, as well as coming up from below as support.
These types of price patterns can be extra challenging because the price cant get going in any direction very easily.
Price rises into overhead trend lines and reverses back down.
Price then falls into trend line support and bounces back up.
This creates a very challenging sideways range which is not based on price levels but more based on where the trend lines are.
Draw your trend lines wisely, be patient for the best spots, and remember the same rules always apply to trading these horseshow patterns.
Buy a Pullback at support and Sell a Retracement at resistance
As always we will review these in real time in our live trade room.
