Most of the time when crude breaks monthly/weekly highs, you can expect pullbacks, also when prices end in zero. (90.00) If you can dig up weekly charts going back to 1988, you can see where this occurs so often in CL. I don't have much on my PC's, many of my charts are in chart books as I first started trading longer term trading commodities. Took a couple stabs, let's see if 88.40 holds, seems to be a firm base. I find that Crude as opposed to 6E, behaves much more for pure price action than any other market I have every traded, which generally means tighter stops, but it depends on timeframe as well.
Didn't see the forest for the trees. Today I was focused on trading with the trend. CL was up big, so I thought, great, up trend. I marked up my charts with S/R lines (actually, only support since there weren't any recent resistance lines to be had) and off the races I went. Trade #1 After topping out, CL started down. This drop slowed right where I had a support line, so I went long at 90.13. I kept my stop at 10 ticks where I was stopped out. -10 ticks. I tried to catch a short trade on the 06:45 bar with a limit sell at 89.85 but wasn't filled. Price continued to drop and stopped at a 5 min support line. Trade #2 Went long at 89.45 and planned on riding it back to the EMA. On the 07:05 bar, after about 8 ticks to the good, I moved my stop to the bottom of the 06:50 hammer, thinking that might offer support. I was stopped out on the 06:55 bar. +4 ticks. I had drawn a 60 min support line that was just a hair under the previous 5 min line. As price moved into that, I'm still thinking retrace to the EMA. Trade #3 When long 89.27 on the 06:55 bar, but this time moved my stop to BE+2 after the 07:25 bar started showing me some love. Short relationship. +2 ticks. So now I'm looking at the amazing down trending day and trying to figure out why I was so fixated on long trades. Here's what I came up with. The first trade was almost forgivable, since the trend was up and price had come down to a 5 minute support level, and was still close to the EMA. I did try to short the 06:45 bar, missed entry, and didn't chase it. I was still under the illusion that there was support nearby. Both the second and third trades were right at what I believed was support. By the time price broke through the 60 min support at 07:30, the move was over. On a brighter note, I took 3 trades on 6E and made 20 ticks. Man... these trades look stupid.
In hindsight maybe, but when you were trading on the right hard edge, they looked as if you were buying the pullbacks on an uptrend. You only lost a few ticks trading against what turned out to be a full 2 point drop. You avoided getting chopped to pieces in the consolidation. You didn't keep selling the low of the day [edit: after that game was over]. I would say: good job, well done. Next.
Any long hopes went right out the window when the pit open drove price through previous support, then through the 20-EMA/uptrend line, then failed to close back above the 20-EMA. Time to short the rallies and position yourself for the breakouts downside. There were no confirmed long signals today, not even on the hourly chart. Counter-trend long trades worked fine if you bought weak breakouts near lows or bought the bottom of the range later in the day, both strategies with tight stops. CL overshot the upper Keltner on the daily chart and was due to pull back because it was time for even the staunchest trend followers to take something off the table and a channel overshoot is good place to do that after such a clean run up.
It is best to look at the EMA like it was a trendline, if it is sloping down, major trend is down. Almost all your trades today, I waited a few bars and went short till market started to slow down at 88.40 area and took a few longs for a 30-40 tics, but I was risking 6 tics. In one of John Hills books that he wrote in late 1970's, he mentions a "thrust" bar where price thrusts out with conviction from congestion, but CL never did that, it made pivot highs that were but a few tics breaking previous pivot high which tells me resumption of downtrend. I like using the 55 SMA along with smaller EMA, the 55 SMA gives a better idea for me to see the forrest, bars and slope declining tells me a good downtrend in place, but if slope is down and price above, I sit on my hands cause I don't know what is going on. And if 55 SMA is flat, the smaller EMA will have to take a bigger direction of immediate trend. Some of my rules of trading are trying not to trade, trade as seldom as I can, more trades reduces your $ per trade, like a batting ave. I want to keep this up, taking marginal trades are not worth my ave going down. Don't think about the money, think if this trade applies to all the rules of trend first, try to get your losing percentage down to under 20% of all trades, once you can do that, you can increase size, then the money starts rolling in.
I was going to ask this on CL Redux, but was worried that it wasn't the proper forum, so I'll ask it here. I saw the two double tops form on CL at 06:15/06:20 and 06:45/06:50, with the 06:50 bar poking out a new HOD. I put a stop sell 1 tick below the bottom of that bar at 88.80 and was filled on the next bar. I exited early with 10 ticks on a move that clearly could have netted me much more. The reason I did this (other than the fact I'm a sissy), was because the trend was up and I didn't really see a clear target. Any insight on a better read of this trade would be greatly appreciated.
Did a little better today on my entries, but my exits suck bad. I know this is where the game is won, so I am working on it. Overnight session was a weak uptrend/sideways market. The 05:30 bar poked above the overnight high, then the next 4 bars kept poking at it. Trade #1 I know that continued poking at a R/S level tends to weaken it, but on the flip side, this could be shaping up to be a range day. My 3 choices were to play the range day and this would be an excellent place to short, play the breakout to a new high, or do nothing. I chose to short at the upper lever with a tight stop. Wrong decision. I guess when in doubt, do nothing. -6 ticks. Price moved sideways for awhile, but formed a second double top at 06:50, with that bar making a HOD. Trade #2 Entered a stop sell under the 06:50 bar and was filled. Looking at the chart and where I entered, you'd think I'd be heading down to the Benz dealership, but I really screwed up the exit. In spite of the double top and failed HOD breakout, I'm looking at the EMA and still thinking uptrend. There looked like support in between the double tops, and at the top of the first wedge break out back at 06:00. I really had no clue how to manage this trade. Maybe I need a rule that says do nothing for 2 bars. Anyway, +10 ticks. Trade #3 Price recovered back to the EMA. The 08:20 bar was an outside bear bar that formed a double top with the previous bar and closed back under the EMA, back with the trend. I calculated my stop 1 tick above the double top and entered a sell limit order at 88.07 and was filled. Got my hard target of +25 ticks. Didn't see any other signals to trade, although I was tempted to short under the small doji at 09:15. This seemed reasonable, since it failed to go any higher after the strong momentum from 08:50 and 08:55. Took 1 6E trade for +1 tick. I was using my second monitor for programming and didn't follow the market much.
A trade consists of an entry price or condition, a stop price or condition and a target price/area (yes, or condition ). If you find yourself in a trade where you don't have a clear target, chances are it's an impulse trade and you shouldn't be there in the first place, you can either close it right away or "shadow" the bid/ask with your stop to get free/cheap exposure. However, if you want to improvise a way to "manage" it, simply trail the stop on the top (if short, as in this case) of every 5' bar. If the 5' bars start feeling expensive, then drill down to 3, 2 or 1 minute bars. In this example that would have gotten you out at 87.70 (if you'd held through inventories :eek: ) on the 7:50/55? bar or you could have exited at 88.20-ish when the spread started widening before the report. The same system/logic would have stopped you out of your third trade at +17 ticks (more or less) instead of +25.