CLU12 - Update for August 3rd, 2012

Price analysis for the week of August 3rd, 2012:

Market Overview: Calmer heads seem to be prevailing of late from Europe as the ECB has stated in very strict terms that it will do all in its power to defend the Euro-FX. From North America, surprisingly positive jobs data coupled with little inflation and good corporate earnings have laid the ground work for a very typical 'dead cat bounce' out of the seasonal late spring/early summer lows. It is interesting to see this past week saw the initial signs of the smart money unwinding their rather dramatically bullish stance in Crude. Is this the beginning of them walking away from the crude bull? Only time will tell, but my hunch is we will trade back into the mid to high 90's. then fail into the late fall/early winter as the impending US 'fiscal cliff' (January, 2013) will dominate news headlines and trade at that time.

Trading Strategy (1 month): the rather significant double bottom that was registered on the break of 90.95 shall act as support in the short term. My upside target remains the daily ab=cd bull pattern goal of 95.68 but I do believe we are going to see some rather dramatic swings (both higher and lower) before we hit our destination.

Trading Plan for this coming week: I shall be looking for some sort of consolidation of the rather dramatic rally seen on Friday. A 50% retracement of the move up would bring price back into the 89.33 area. Having said that, a move through Friday's highs would suggest we are going higher in the short term. Regardless, I shall wait for some sort of consolidation in the short term before entering a position. Should that consolidation come in followed by a subsequent breakout (on good momentum and volume) I shall look to enter long. Ideally I would like that signal to come in at or near an 'OTE' entry level.....lets see what happens.

Focus for the week: Continue to work with using the hourly chart for targets/breakouts and the 9 period ema on the 15m chart for entry points. 'Process goals' have gone very well for the past month - continue to follow both analysis process and trade process strictly. This week's primary focus shall be (as mentioned below) the inclusion of 'OTE' trade signals into my analysis process.

Analysis process: Assuming the 60m chart is both trending (as measured by 9/20ema relationship) and has well established targets (typically I use 'harmonic' price patterns like the ab=cd for example) and both volume and momentum are in confirmation. On 15m signal (9/20ema confirmation of trend, price trading at or between 9ema & 20ema) move to Trade Process. Ideally I would love to see these signals come in right at an 'OTE' entry points.

Trade Process: Upon completion of analysis process begin trade process. Enter order (on stop) to take a position on 2 (two) contracts AOCO -12 [for total risk of $250 on the trade] / +10 & +40 [for total reward of $490 on the trade]. AOCO means that once the primary open order is filled there will be an automatic exit order entered on 1 (one contract) at plus 10 ticks ($100) and one (1) at plus 40 ticks ($400). Additionally, there will be a stop loss order entered on 2 (two contracts) at minus 6 ticks ($120). Once the first exit order is filled (at plus 10 ticks) the stop/loss on remaining one (1) contract is moved to b/e+1 (or +1 tick from where the original entry.  As previously stated, I am still debating the merits of the 'stop move to b/e+.01' trading theory.

Comment: I am very pleased at finding a new 'edge' trading methodology this past week called the Optimal Trade Entry model ('OTE'). Youtube Web link. I shall be trying to incorporate OTE signals into my trading plan as they correspond very nicely with 60m ab=cd target analysis and double bottom/top theory.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca
http://crisdaytrading.blogspot.ca/