In last night’s Swing Trader’s Insight newsletter, I called today a Buy Day for February Crude Oil futures according to the Taylor Technique count. (For the basics on TT go here). On the daily chart below I labeled the past days (B, S and SS) to give you an idea as to the recent rhythm. There was additional bullish evidence: 73.22 is a 50% retracement of the past week’s rally, and ROC dropped to a buy signal.
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For a Buy Day, we generally watch the previous session low as a reference price. On a Buy Day a market ends a down move (a selling auction, in Market Profile parlance) and begins a rally. We look for “excess” selling as the selling auction ends; this is often marked by a move below the previous session low. It is this last break that fools unwary traders to sell when they should be looking to buy, and the move back above the previous session low is our buy signal.
The 30 minute chart for Feb. Crude Oil futures below shows today’s market action. Crude’s first move below 73.17 ended around 6:30 AM with an intraday low at 72.88. We looked to buy as it moved back above the 73.17 level and placed a stop under the intraday low at 72.88. If you were looking for a day trade, there would have been a move of around $400 to the first intraday high, but a swing trader would likely have been stopped out of the first entry at around 9:50, resulting in a loss of around $350 (assuming a long entry at 73.20, stopped out at 72.85).
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If you didn’t take the first long entry, or were looking to re-enter on the second dip, the next move back above the 73.17 reference price occurred about 10:20 AM. This move was accompanied by bullish oscillator divergence; a lower price low versus a higher low for slow stochastics. The second long entry would have had a wider stop, under the new price low at 72.72.
The second rally took off, and the market quickly moved higher. I looked at the previous overnight high at 74.02 as a potential first profit target. Interesting to note that once that was taken out, it then served as support on the correction off the new intraday high.
Today was the Buy day, so tomorrow is the Sell Day in the Taylor cycle. The first Sell Day target is today’s high at 74.91; this would be a move of around $1700 per contract. If you look back up at the daily chart, the broken up trend line came in at 74.99 today; broken support becomes resistance. From a risk standpoint, I might be quicker than normal to take profits on this trade. We get the EIA energy report out at 9:30 tomorrow morning, and it often causes volatility. Additionally, holiday market conditions make shenanigans (technical term) more likely.
Thinking about the markets in “Taylor terms” can help you trade in rhythm with the markets, rather than fighting them.
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
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