June 6, 2011
Dollar gave me first clue, Crude Oil confirmed at Wedge Highs
830am est
We review the news ahead of the day and we see 830 and 10am news out of Canada which will HOPEFULLY drive prices around on the Crude Oil 07-11 contract.
We have some concerns that traders may be sitting on hands without any major news today and with Tim Geithner at 1115 and Ben Bernanke at 345pm today speaking.
Tough to tell at this time, but we will keep an eye on the volume in the market and these will certainly be responsible for slow day ahead.
850am est
We review the dollar index 06-11 contract. We use the 89range chart first because it shows us the most important price levels and AREAS to wait for.
We can see three very easy price structures:
1. Sideways Range from 74.510 down to 73.610
2. Price Channel (Bearish)
3. Price Wedge (sideways)
The BMT is above us, which will act like a price magnet. The faster timeframes also show the BMT on the Dollar above us.
BTM = price magnet = price ‘should’ try and rise, but who knows?
Question is…
Will the dollar rise off these lows into the BMT above us?
Or will it fall to new lows and test the major 72.860 support levels and the lows of the bear channel.
Now that we know the POTENTIAL to rise and/or fall there is no strong bias for us to use in the markets we trade.
Recall the dollar correlation:
– If price rises on the dollar im selling retracements and selling at resistance on the markets I trade.
– If dollar falls im buying pullbacks, I’m buying at support on the markets I trade.
The 89range chart shows me the BIG picture, but the dollar is very important to be moving at the time I take trade, so I need to know what the short term trend on the dollar is as well.
The 34range and the 13range charts will be used to define the SHORT TERM TREND.
We can easily see the short term trend is LONG on the 13range chart.
This can easily change to a sideways trend, which will then give us opportunity on both sides of the market.
The major long term down trend on the dollar is great for swing traders, they will be net long commodities, etc.
Short term trend is up or sideways, which is what day traders will use to make educated decisions.
My plan of attack, using the dollar:
– If the dollar keeps rising off these lows I will be looking for selling opportunities on the crude and gold this morning.
– If the dollar goes flat off these lows we assume it will be looking for clues later this morning and we will be trading both long and short on gold and crude, buying the lows and selling the highs of the range we are in.
– If the dollar moves lower (example, after we rise and test resistance) we will buy pullbacks on crude oil and gold.
920am est
We review crude oil futures 07-11 contract and we begin with the 89range chart first.
The big picture on CL 07-11 tells us the following:
– Price Wedge
– Sideways Range(s)
– Bullish Price Channel (major)
– Bearish Price Channel (minor)
– BMT in the middle
– Big Round number 100.00
This information tells us we are right below the big round number and the BMT
We are in the middle of the trading range and the middle of the wedge.
All signs point to….be careful!!! We want to buy the lows and sell the highs of the range we’re in, and we in the middle.
Now lets use a 34range chart to find the specific market personality we will use to trade this morning.
PHOD is above us, and the PLOD is below us, making this an INSIDE trading day.
Our plan of attack will be as follows:
– Inside day = trade inside the range, buy the lows and sell the highs, avoid the fake-out breakout
– Expect the PHOD and the PLOD to act like a price magnet.
– Buy the lows of the wedge/range/channel and sell the highs, avoiding the fake-out breakout.
If price rises:
– I am a seller first, and buyer second.
– I don’t buy at the highs, I buy with new higher highs using a pullback.
– Avoid the 100.00 and the BMT around that area
– Sell the highs of the price channel
– Sell the highs of the wedge
– Sell the highs of the sideways range.
– Sell at resistance levels, 100.65, 100.90, 101.75
If price drops:
– I am a buyer first and a seller second as price drops
– I don’t sell the lows, I sell retracements after seeing new lower lows.
– Im buying the lows of the wedge
– Buy the lows of the channel
– Buy the lows of the sideways range
– Buying support at 98.85, 98.46, 98.15 and 97.90
1130am est
We are right in the middle of the dead zone as we wait for the European markets to close and HOPEFULLY give us some better volume.
Gold 89range chart shows us a strong price channel over multiple weeks of time.
Strong price wedge and we have broken to new highs above that wedge.
Tested the Previous Swing High from last Wednesday.
All signs point to gold wants to rise up!
