Trading the ‘Bow-Tie’ Pattern | SchoolOfTrade Newsletter 03/13/17

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Crude Oil is range-bound with a rare ‘bow tie’ pattern, which like all ranges, is telling us EXACTLY where to be looking for the best trading opportunities tomorrow.

S&P is range-bound, and we have a measured-move and a bull channel giving us an excellent place to look for selling-opportunities tomorrow.

Gold is bullish, but a short-term trading-range on the chart tells us to avoid selling this low, and watch for traps above the high tomorrow.

Euro is bearish, but an excellent example of market-psychology is telling us to wait for more confirmation before selling more tomorrow.

FDAX is bullish, but we have a major objective just a few points above us, and the narrowing range tells us to be looking for traps before previous swings.

Crude Oil

Crude Oil is range-bound with a triangle, which has developed into a “bow-tie” as price tries to find balance after last week’s massive run lower.   The trading-range tells us to sell the highs, buy the lows, and avoid the middle tomorrow.  Looking left, it’s easy to see this market may be considered a spike & range by longer-term traders, so for tomorrow our goal will be to sell the highs using buyer-failures for a target going back to the low.  The measured-move overhead, combined with today’s high at .68 will make for easy levels for the sellers to use tomorrow, so keep an eye on those highs.

E-Mini S&P

E-Mini S&P is range-bound and trading above the highs, just a few points below the measured-move this evening.  The trading-range tells us to sell the highs, buy the lows, and avoid the middle, and with price pushing higher, we’re looking forward to using the ‘2-Try Rule’ to sell with failures going back into the range tomorrow.  One thing to keep an eye on is this sluggish bull channel I have on the chart, and combined with the measured-move, will make for an excellent resistance zone to be looking for the ‘2-Try Rule’.

Gold

Gold is bearish and trading at the low of a spike & range this evening, which tells us to avoid selling low, and look for traps/failures above the high of the range, or a successful breakout-pullback below the low of the range tomorrow.  We can easily see the $1200 round number is waiting as a target, but the challenge will be getting the measured-move tomorrow.

Euro

Euro is bearish and grinding down the high of a spike & channel this evening as it tries to convince the bears to keep selling below the low of the trading-range.  This chart is an excellent example of market-psychology at its best.  The sellers had a strong move lower into a spike & channel, they got their ‘trap high’ and price sank back to the lows.  Now we sit at the lows and its important now that we wait and see if sellers want to keep selling this low, or if they will wait and sell again up at the highs tomorrow.

FDAX

FDAX is bullish and trying to complete a measured-move and the wedge target tomorrow as we roll forward to the 06-17 contract.  The bulls have control, but we’re getting to the tail end of the wedge which means there isn’t much room to trade inside the wedge, so we expect to see an opportunity to buy a correction back at support levels waiting below.  This may also be considered a bear flag for longer-term traders coming off the high of the range we were watching last week, but the bulls have control, so we wait for the sellers to take control and then we can consider being a short-term seller tomorrow with a target going back to re-test Friday’s Low.