June 13, 2011
- in Uncategorized by schooloftrade
Dollar Index Jumps on Continued European Economic Fears pushing Commodity Prices lower ahead of Quadruple Witching
All eyes over the weekend were on Greece and how the European Union holds massive amounts of their debt on the balance sheet. Many traders over the weekend took a very negative outlook on Europe and a very position outlook on the US Dollar…all out of fear that Greece will be the undoing of the Euro.
We also have falling commodities this morning. The reaction to a rising dollar is lower costs of commodities. An easy way to think of this relationship can be found here. Basically, when the dollar drops things become more in demand, which means the costs go up, and vice versa.
This is going to be an interesting week ahead of us. We have options expiring this week, and its June so its Quadruple Witching on Friday. We will discuss the ways to trade this week in our live trade this morning.
We don’t have any news this morning in the US or Canada. All we can see on the schedule for today is one of the non-voting members of the Fed (Lacker) speaking in Virginia and is not expected to be discussing anything of importance for day traders…but we shall see.
I would expect today to be a slow start, so lets take our time getting into the rhythm of the week, and then look for the late-morning move once traders get to their desks and start planning their attack for this OPEX-Week ahead of us.
Lets review the Dollar Index Futurestoday
The 89range chart tells me the following:
– We’re NOT at the of the major price wedge like we were last week
– We’re in the MIDDLE of the wedge, and this is known to be a transitional area, up or down, while traders find confidence in either direction.
– I have the BMT (Big Money Trigger Line) overhead at 75.744 which will act like a price magnet.
– Sideways range from 75.370 down to 73.800
We assume the dollar will run into some slop and chop in the middle of this price wedge.
We assume the highs of this minor sideways range will act as minor resistance.
If the dollar wants to go sideways it will likely stall and reverse at 75.400 or the BMT at 75.744
We also assume the dollar will try and test the BMT above it. We shall see if it can do it today, might not have enough gas in the tank to get there.
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| Dollar Index 89Range SchoolOfTrade.com |
Our plan of attack using this dollar index information is as follows:
– If the dollar makes new Lower Lows I’m going to be looking to buy pullbacks with new higher highs on the markets I trade.
– The dollar may trade sideways, and if it does I will then look to trade inside the range im in, buying the lows and selling the highs.
– The dollar may rise off this support, and rising dollar will give me selling opportunities on the markets I trade. Look for selling retracements if the dollar index rises.
Crude Oil Futures
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| Crude Oil 89Range SchoolOfTrade.com |
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| Crude Oil 34Range SchoolOfTrade.com |
The 89range chart shows me the following:
– At the lows of the major price wedge
– We can see our swing trade trigger about to fire off LONG at these lows
– Bearish Price Channel, and we are at the lows
– Sideways range from 102.40 down to 97.80, very wide with that big move down from late last week.
– The BMT (Big Money Trigger Line) and the Big Round number of 100.00 are above us, these will be price magnets.
What does the 89range chart tells us?
– Expect price to rise off the lows of the price wedge and the channel
– Look for the 100.00 and the BMT to act like a magnet, drawing price higher.
– Swing trade about to fire off long also gives us confidence to the long side. (short term)
Let’s move to a faster timeframe, the 34range chart will give me more details.
– Inside day, above the PLOD from Friday (not Sunday)
– BMT and Big Round # are above us here as well.
– Short term bearish price channel, which is also creating a short term bearish price wedge.
– Short term sideways range from 99.58 down to 97.81
Now that we have all the ingredients for our trading strategy this morning, lets plan our trades and then simply trade our plan.
Our plan on trading crude oil today:
– Inside day tells us to trade inside the range we are in. buy the lows, sell the highs, avoid the middle, and avoid the Fake-out breakout.
– Short term on dollar is trending down, so looking for new higher highs and then buying pullbacks.
– We are at the lows of the range (long term) so look for rising prices and buying pullbacks.
– If we trade sideways we will buy the lows and sell the highs.
– If we breakout above or below we will buy pullbacks and sell retracements.
What if price rises:
– I’m selling resistance first, then buying pullbacks second with new higher highs
– I will not buy at the highs/at resistance
– Only buy at support
– Avoid the Big round number of 99.00
– Sell the range highs at 99.58
– Avoid the 100.00 and the BMT at 99.99
– Avoid the middle of the 89range price wedge.
– Sell the highs of the range at 101.71
– Avoid 102.00
– Sell the channel highs at 102.30
If price falls:
– Im buying first, then selling retracements second.
– I don’t sell at the lows/at support
– Sell at resistance
– Buy support 98.30
– Avoid the big round number of 98.00
– Buying the range lows and the channel lows at 97.81
– Avoid 97.00 big round number
– Buy support below us at 96.61
– If we break below the Major channel lows at 96.61 we will go back to the drawing board and do this again.
