June 7, 2011
Everyone knows where Crude Oil’s going…so why didn’t it?
830am est
Let’s begin our day reviewing the dollar index:
89range chart shows me at the lows of the major price wedge.
We also see a sideways range from a recent swing high and swing low.
We see major support below us, and the BMT is above us.
Three scenarios to consider:
– Price may drop to the major support of 72.860
– Price may rise to the BMT/Trigger Line
– Price may trade sideways inside the current range
If price rises off these lows we look to sell the markets we trade.
If price trades sideways we will also look to trade a sideways range on the markets we trade. Buy the lows and sell the highs, avoid the middle.
So the 89range chart tells me there may be 3 possible options for the dollar.
So which one is higher percentage? What is the short term trend telling us?
89range shows me the major levels of support/resistance, and the price structure (wedge, channel, sideways range)
Now we use a 13range chart to see the SHORT TERM TREND.
The 13range chart shows us a strong bear price channel, a sideways range and a bear price channel inside the range.
We now know that dollar is trying to keep dropping. We add a price alert to 73.815 (swing high) to mark the line in the sand where the dollar will be assumed to have broken this bear channel and we assume it will either rise or trade sideways.
My plan of attack using the dollar as my guide:
– If the dollar keeps dropping inside this bear channel we want to be buying pullbacks on the markets we trade.
– If the dollar trades sideways above 73.815 we need to keep BOTH sides of the market open, look to sell the highs and buy the lows of a short term trading range.
– If the dollar reverses above 73.815 we assume the trend is broken and we will then assume price on the dollar will try and test the big round number of 74.00, and we will look for selling opportunities on the markets we trade.
915am est
We reviewed the Euro for 35 minutes looking at trading opportunities on the 6E.
Now lets plan our specific attack on crude oil futures.
89range chart on CL 07-11 shows a number of price wedges, sideways range, bear price channel, and many levels of support/resistance above and below.
Its very clear this market is trading sideways ahead of the OPEC meeting on Wednesday.
We see the BMT and the 100.00 Big Round number overhead, which leads us to believe we may see 100.00 tested sometime this morning.
The overall price structure does NOT tell me there is a directional bias, therefore, I will trade both long and short at the best locations.
Now we know the price structure and we have an opinion on where price is going, we now use a faster timeframe to specify the exact entry locations.
Our 34range chart of the 07-11 Crude Oil shows us the following:
– Bear channel tells us to keep selling retracement with new lows
– Sideways ranges tell us NOT to expect new lows and to keep an eye on the price reversals off the lows.
– Price wedge tells us to buy the lows and sell the highs of the wedge.
– PHOD is above us, PLOD is below us, makes this an inside day. (we tried to make new lows once, and failed, so this is a sign of things to come) expect another test of new lows in the near future.
– The BMT is above us at the highs of the channel, this will act like a price magnet
With this new information, our plan of attack is as follows.
If price rises:
– Avoid the 99.00 big round number
– Sell the highs of the price channel at 99.30, 98.87, 98.80
– Sell the highs of the range at 99.30
– Sell resistance at 99.49
– Avoid the BMT 99.69, excellent profit target, sloppy entry area
– Sell the channel highs and the range highs at 99.85
– I will avoid the 100.00 big round number, is also the BMT on the 89range chart. Very risky!
– Sell the PHOD 100.30
– Sell the highs of the wedge, 100.30
– Sell the highs of the range at 100.67, and 101.14
– Remember, as price rises im selling first at resistance, and then buying when that resistance becomes support.
– I will not buy at the highs, I will buy with a pullback.
If price falls:
– Im buying at support first, then selling retracements when that support becomes resistance with new lower lows.
– Avoid the OPEN at 98.48
– Buy the lows of the wedge, using support at 98.33
– Buy support at 98.11, 97.95 , and 96.70 major support below us.
– Buy the lows of the price channel 98.11, 98.00, 97.90, 97.85, 97.80
*The most important factor today when trading crude oil is to remember the fake-out breakouts to the DOWNSIDE are highly likely. Don’t sell those new lows, wait for the retracement, and use caution.
935am EST
Buy the lows of the price range, buy the Low of Day, buy the lows of the price wedge.
The Previous Low of Day is a price level we want to use here, buying long above PLOD and selling short below PLOD.
1000am EST
New lower lows on Crude Oil 07-11 and we sold retracements on the way down.
1030am EST
Price chopping around the lows of the channel, LOD, and lows of the range. We had a difficult time defining WHO was in control here.
We sold short with new lower lows, wave pattern short, and we then bought the lows with a 2step price reversal pattern.
Finally broke back above the PLOD at .33 after sloppy price action chopped us up for a little while.
Once we break back above the PLOD we assume the trading range above us is acceptable which will result in sideways trading. Now looking to buy the lows and sell the highs of a specific trading range.
1045am EST
Price action gets sloppy here now. We know that the end of morning will sneak up on us and we keep a close eye on the time.
We can easily tell both gold and crude oil is losing speed, volume, and direction.
We have lost confidence in this price action, so now we wait for the best patterns to come our way, time to protect capital and be VERY selective with our trading.
1100am EST
We waited for price to make it through the middle of the range.
We cant risk trading in the middle, not with price action looking like this.
We sell the highs of the wedge with a 2step price reversal pattern but it was so sloppy the market on crude could barely break the 4range BMT…yikes!
Finished up our day with an easy wave pattern short
Total today = 222 ticks, 4 contract, great day!
