Tuesday 3 November 2009
Crude presented a low risk entry this morning. We have already addressed the
Crude Oil market as having had a classical breakout from a trading range,
Crude Oil – Picture Perfect Breakout , from the 19th of October. After exiting
long positions at 80.80, we were looking for a place to buy back the position.
That topic was covered a few days ago, Crude Oil – In A Pull-Back Mode. It
showed how Dec Crude Oil traded under 77.00 a few times, and we allowed a
possible pullback from that current level to as low as 74.00. Bear in mind, the
stronger a market, the less a price pullback.
The 120 minute chart below shows how a trading range developed. One of our
rules is to buy in the bottom 25% of a trading range, or sell in the top 25% if
a trade is warranted, depending on the trend. Crude Oil is in an uptrend, so
sights are set ONLY on buying.
You can see from the chart, with the bottom 25% area delineated, Crude made
another probe this morning just under 76.80, and it held. We used a smaller
time frame chart to confirm the low and then enter long on a rally, [buy strength].
If the analysis proves out, this will give us an edge, buying back 355 tics lower
from the 80.80 sell back on the 23rd, Crude Oil – Standing Aside.
Developing market activity will be monitored to determine if this will be a short
term trade within the trading range shown, or if market activity shows strength,
it may turn into a hold for a potential breakout from this trading range.
This illustrates how to use present tense market activity, coupled with past tense
price history, blended with the prevailing trend to take advantage of a trade
opportunity. We cannot know how the trade will turn out, but by using this caliber
of a selection process, and acquiring an edge, the numbers weigh heavily in our
favor.
Long CLZ at 77.25. [Of course, we ALWAYS use a protective stop.]
