Crude oil futures have had a good week for swing trading; it certainly ended the week on a great note. Let’s go through the week. There were two great days to trade, Wednesday and today. This week shows why I look at and write about a large number of markets for my Swing Trader’s Insight service; on a given day there are likely to be limited number of markets with what I recognize as tradable setups. Of those markets there will be a smaller number that make a move that occurs during the hours I’m able to take advantage of (I have a life outside trading!) By following a number of markets I am less likely to try to force a trade in a market with a marginal setup. Looking at the daily chart below, I highlighted the two setups and trades for the week. Monday had a doji day; it didn’t yield a decent setup for Tuesday. Tuesday gave a breakout setup for Wednesday-we’d had two doji days (indecision) and Tuesday saw range contraction from Monday, as Tuesday’s range was 71% of Monday.
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Tuesday’s breakout setup meant we should be looking for a breakout move on Wednesday. I generally look for a directional move on Wednesday, as it’s the day the EIA releases its weekly inventory report, which often yields a directional move. That’s what the market did on Wednesday, a good breakout sales it took out Tuesday’s low. The bounce off the Fibonacci retracement level at 75.44 was a good indication to take profits on Tuesday’s breakout sale. Yesterday was another breakout setup, as Thursday was an inside day and had the narrowest trading range of the previous seven session. This setup is my favorite breakout pattern-it’s a clear sign of contraction. This setup means we were looking for a breakout, directional trade today. The intraday chart for August crude oil futures is below. I drew a red line at yesterday’s high; it’s the first price I look for a breakout level. This is in keeping with the Taylor Trading Technique, where the previous session high and low are reference prices for analyzing price action for the following day. In this case, however, yesterday’s high was not necessarily a great price level to watch, as there were three failed breakout attempts over that level last night.
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In those failures, however, I found something else this morning. Looking at the overnight action, there were two failed attempts to break out last night; these ended up forming a double top at 76.79. This double top level was ca better price to use for a breakout trade this morning-the market was still range bound. The double top formed the resistance at the top of the range, so a breakout over it was the trade we were looking for. From that long trade entry, the first profit target was the Fibonacci retracement level at 77.56; it was a 50% retracement of this week’s break. The initial resistance at that level shows the wisdom of looking at that as a place to take profits. As it is resistance on a trending day, it could also have been a point to buy a breakout for a further advance. Breakout setups are one of my favorite patterns to trade, as they tend to offer good risk reward ratios. Looking at a larger number of markets, as I do for Swing Trader’s Insight, increases your odds of capitalizing on these setups when the occur. 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.
