Welcome
back to CRI's ongoing Crude Oil Day Trading Blog.
We are within official 'roll' period for day traders - Now in March, 2013 contract (CLH13)
Price analysis you see (first chart & commentary) is
CLH13, for the week of Jan. 11th - 18th, 2013.
Each trading day (time permitting) a
15 minute chart is added and trades for that day are analyzed:
Market
Overview: In a week that saw
little movement in the US Dollar index itself, that can't be said of
its major trading partners. While the Yen continues to search for
support there are tells out of Europe that maybe the Euro (and its
trading partners) are starting to run out of upside steam. Regardless,
during times like these (where international currencies are searching
for new trading levels) small investors are best to leave the whole
thing alone. Trying to out-guess the market, and even going as far as to
declare a certain point as 'the bottom' is foolish at best and can be
rather financially taxing at worst. Given too our seasonality model (US
Presidential election year cycle) suggests weakness after the
inauguration and the fact that we have the back half of January ahead of
us (re. January Barometer) one shouldn't be too surprised to see a
period of 'back-filling' over the coming weeks - caution is currently
warranted..
Weekly highlight: Crude Oil continued its steady march higher through the week hitting an
intraday high of $96.50 and then backing off into the weekend. Based on recent CoT data (where
Institutions
have moved out to a 5:1 long over short bias) it seems institutions
must have seen a fall in the US Dollar index coming, a bullish
fundamental backdrop for CL demand building, and a general resumption of
a 'risk on' atmosphere returning to the market. But that now is looking
backwards. As of Friday's close we seem to have stalled
a bit up top here and I think there are a few justifiable reasons
why:
1.
The seasonal US Presidential election cycle rally usually stalls
after the January inauguration.
2.
As well as our regular Triple witching, we have a Leap option series (Jan.
2013) expiry this Friday.
3.
The back half of January's price action is often weak as it usually
hints at what the second half of the year ought to look like (per the January
Barometer).
4. Technically (for February NYMEX Crude Oil), $94.87 was a significant peak from back
in October and appears to still remain as a
significant resistance point at present. Indeed, a pullback from
current levels back into the high 80's may be setting up an Inverted
Head & Shoulders pattern. Additionally, the rally has brought us
right up to a major downtrend line on the weekly charts. To add a
further cautionary note, daily and weekly 50% levels have been
exceeded so are no longer supportive of higher price action.
5.
With institutions so heavily biased to the long side, is it not
realistic to look for some sort of profit taking on their part? And, can
we expect them to go to even further extremes? You can only stretch the
proverbial rubber band so far....
Put
all these 'backdrops' into place and one shouldn’t be
surprised to see price consolidate for a bit at this point.
Trading
Strategy (1 week): BoT (Break out Trades) have been very successful of
late. The primary change I have made (which has enhanced performance
remarkably) is to NOT buy/sell the actual breakout but to wait for the subsequent test of the 13 period exponential moving average on the fifteen minute chart. I have seen this come in on the next 15 minute bar
and I have seen it come in after 20, 15 minute bars. Price
often reverses after the counter trend 13ema touch, and the trade
resumes its 'breakout direction'. While stops do occur, I have
'tracked' this trading model take on average 5-10 ticks of heat before
reversing back in my favor. Considering the volatility of the current
market, .40 with-trend swings from the 13ema seem to happen quite often
so hence my interest in that level to look to take profits. I will
though, get very skittish about holding a position that is either
above/below the 13ema Keltner Bands. Put together, I feel comfortable
trading this system and that makes me feel good too.
Conversely,
ORT's have been very difficult trades of late and
as a result, the profits seen through the beginning of December have
not materialized as anticipated. The problem with any statistical
model is the amount of inputs. For a model to be deemed statistically
relevant one must have a massive amount of inputs to offset short
term anomalies. Interestingly, December saw an inordinate number of
winning trades. I suppose to bring that statistical model back into
historical 'norm' we needed a period of inordinate loses. I believe
that is what is happening now. Interestingly many of the traders that
work with or are associated with TopStepTrader themselves either were
simply not trading or were very reticent about positions this time of
year. I hear one gentlemen recently flatly state that he was very reluctant
to do any trading until after the
first NFPR of the year is released! I too am coming to appreciate how
dangerous and 'non-normal' the period around Christmas can be for day
traders. Position traders can take advantage of short term 'air
pockets'; day traders can too; but you better know exactly what to
expect and how to play it. With all that said, I will
approach the ORT & 7RT trades with a little more caution going
forward. With the idea that BoT's are often a good proxy for general
market direction, I want to start taking the ORT & 7RT trades that
agree with the current BoT pattern. And if the RT 'buy' level is far
away from 13ema; LEAVE IT ALONE. I fully expect to miss a few of the
range trades but I simply can't be so cavalier in the face of
conflicting BoT levels...
Mental
State Review: As per last blog entry, ORT losses have been rather
significant of late. So much so, that I am reluctant to participate
until I start to see some regularity again. If I am going to take a
range trade for the coming week, it must agree with BoT analysis or I
won't take it. Sometimes the best offense is a really good defense.
While
the daily loss limit of the reduced combine ($30k with max daily risk
of $500) has been hard to work with, I find my '3 strikes' rule keeps
me honest. Daily loss limit must not exceed $465 (3 losing trades at
15 ticks each plus $5 commissions per trade = - $465). This number in
itself scares me a little (being so close to the risk threshold) that I
have found of late that if I find myself with 2 losers and in and around
$300 in losses, I may just call it a day and wait for the next to trade
again.
Trading Plan:
1. BoT (momentum):
Determine bother upper and lower OTE ss entry points on higher time frame (Daily/4Hour/1Hour charts). Find
price breakout (typically double bottom) confirmed by momentum &
volume on 15 minute chart at or near these higher time frame OTE ss
entry points. Calculate realistic targets (50%-70.5% retrace into VProf
'Claws'/ma's/gaps on higher time frames). Monitor 13ema on 15 minute
chart for entry levels once the breakout has occurred. Look to enter with
the prevailing trend (BoT) on touches of the 13ema. Regardless of how
long it takes, I can only take a BoT position on that condition. All
orders should be entered as AOCO (-15/+41). I can only consider moving
the actual stop at +30 (or opposing Keltner band touch). Goal for the
week is to 'try' 1 trade per day that meets BoT criteria.
2. ORT & 7RT (time frame range trades):
I
will prepare as usual for these daily setups. After about a month of
'forcing' myself to take every setup I have come to appreciate the
model, its potential, and its risks. As mentioned above, I will continue
to follow the model and indeed take positions, but not if they argue
with either a significant counter OTE ss level (meaning the market has
moved to a dramatic extreme) or if it is in the face of a prevailing
BoT.
That's
all for this post,
Brian Beamish FCSI
The Canadian Rational
Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca
http://crisdaytrading.blogspot.ca/
Welcome
back to CRI's ongoing Crude Oil Day Trading Blog.
After
a much needed break, CRI's CL day trading blog is back up and
running.
Price analysis you see (first chart & commentary) is
CLG13, for the week of Jan. 4th - 11th, 2013.
Each trading day a
15 minute chart is added and trades for that day are analyzed:
Market
Overview: The beginning of 2013 has seen a break in both 'fear'
proxies (US$ Index & Jap. Yen) on a massive inflow into the Euro & Euro related currencies. This action has come on the heals
of better than expected economic data (US/China in
particular) but also too on comments from ECB officials suggesting
the worst may be behind the Euro zone - at least for now. Is this the
start of a new global economic up-leg? That may be too soon to
declare but one thing is for sure, based on our time tested 1st 2wks
of the Quarter Study (Q1'13) we can conclude that for the first quarter of 2013, institutional money is definitely flowing towards 'risk
assets' rather than away from them.
Weekly highlight: Crude Oil continued its steady march higher through the week hitting an
intraday high of $94.70 and then backing off into the weekend. Based on recent CoT data (where
Institutions have moved out to a 5:1 long over short bias) it seems institutions must have seen a fall in the US Dollar index coming, a bullish fundamental backdrop for CL demand building, and a general resumption of a 'risk on' atmosphere returning to the market. But that now is looking backwards. As of Friday's close we seem to have stalled
a bit up top here and I think there are a few justifiable reasons
why:
1.
The seasonal US Presidential election cycle rally usually stalls
after the January inauguration.
2.
As well as our regular Triple witching, we have a Leap option series (Jan.
2013) expiry this Friday.
3.
The back half of January's price action is often weak as it usually
hints at what the second half of the year ought to look like (per the January
Barometer).
4. Technically (for February NYMEX Crude Oil), $94.87 was a significant peak from back
in October and appears to still remain as a
significant resistance point at present. Indeed, a pullback from
current levels back into the high 80's may be setting up an Inverted
Head & Shoulders pattern. Additionally, the rally has brought us
right up to a major downtrend line on the weekly charts. To add a
further cautionary note, daily and weekly 50% levels have been
exceeded so are no longer supportive of higher price action.
5.
With institutions so heavily biased to the long side, is it not
realistic to look for some sort of profit taking on their part? And, can we expect them to go to even further extremes? You can only stretch the proverbial rubber band so far....
Put
all these 'backdrops' into place and one shouldn’t be
surprised to see price consolidate for a bit at this point.
Trading
Strategy (1 week): BoT (Break out Trades) have been very successful of late. The primary change I have made (which has inhanced performance remarkably) is to NOT buy/sell the actual breakout but to wait for the subsiquent test of the 13 period exponential moving average on the fiftenn minute chart. I have seen this come in on the next 15 minute bar and I have seen it come in after 20, 15 minute bars. Price often reverses after the counter trend 13ema touch, and the trade resumes its 'breakout direction'. While stops do occure, I have 'tracked' this trading model take on average 5-10 ticks of heat before reversing back in my favor. Considering the volatility of the current market, .40 with-trend swings from the 13ema seem to happen quite often so hence my interest in that level to look to take profits. I will though, get very skittish about holding a position that is either above/below the 13ema Keltner Bands. Put together, I feel comfortable trading this system and that makes me feel good too.
Conversely, ORT's have been very difficult trades of late and
as a result, the profits seen through the beginning of December have
not materialized as anticipated. The problem with any statistical
model is the amount of inputs. For a model to be deemed statistically
relevant one must have a massive amount of inputs to offset short
term anomalies. Interestingly, December saw an inordinate number of
winning trades. I suppose to bring that statistical model back into
historical 'norm' we needed a period of inordinate loses. I believe
that is what is happening now. Interestingly many of the traders that work with or are associtaed with TopStepTrader themselves either were simply not trading or were very reticent about positions this time of year. I hear one gentlemen recently flatly state that he was very reluctant to do any trading until after the
first NFPR of the year is released! I too am coming to appreciate how
dangerous and 'non-normal' the period around Christmas can be for day traders. Position traders can take advantage of short term 'air pockets'; day traders can too; but you better know exactly what to expect and how to play it. With all that said, I will
approach the ORT & 7RT trades with a little more caution going forward. With the idea that BoT's are often a good proxy for general market direction, I want to start taking the ORT & 7RT trades that agree with the current BoT pattern. And if the RT 'buy' level is far away from 13ema; LEAVE IT ALONE. I fully expect to miss a few of the range trades but I simply can't be so cavalier in the face of conflicting BoT levels...
Mental
State Review: As per last blog entry, ORT losses have been rather
significant of late. So much so, that I am reluctant to participate
until I start to see some regularity again. If I am going to take a
range trade for the coming week, it must agree with BoT analysis or I
won't take it. Sometimes the best offense is a really good defense. While
the daily loss limit of the reduced combine ($30k with max daily risk
of $500) has been hard to work with, I find my '3 strikes' rule keeps
me honest. Daily loss limit must not exceed $465 (3 losing trades at
15 ticks each plus $5 commissions per trade = - $465). This number in itself scares me a little (being so close to the risk threshold) that I have found of late that if I find myself with 2 losers and in and around $300 in losses, I may just call it a day and wait for the next to trade again.
Trading Plan:
1. BoT Criteria: Determine bother upper and lower OTE ss entry points on higher time frame (Daily/4Hour/1Hour charts). Find price breakout (typically double bottom) confirmed by momentum & volume on 15 minute chart at or near these higher time frame OTE ss entry points. Calculate realistic targets (50%-70.5% retrace into VProf 'Claws'/ma's/gaps on higher time frames). Monitor 13ema on 15 minute chart for entry levels once the breakout has occured. Look to enter with the prevailing trend (BoT) on touches of the 13ema. Regardless of how long it takes, I can only take a BoT position on that condition. All orders should be entered as AOCO (-15/+41). I can only consider moving the actual stop at +30 (or opposing Keltner band touch). Goal for the week is to 'try' 1 trade per day that meets BoT criteria.
ORT & 7RT:
I will prepare as usual for these daily setups. After about a month of 'forcing' myself to take every setup I have come to appreciate the model, its potential, and its risks. As mentioned above, I will continue to follow the model and indeed take positions, but not if they argue with either a significant counter OTE ss level (meaning the market has moved to a dramatic extreme) or if it is in the face of a prevailing BoT.
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/
Monday's Trade (3-3 +$325 Prac Ac)
Since I had a number of non-market related things to take care of today (and I would be away for most of the NYPit session) I made it a point not to trade my combine today. I did notice through the London Kill Zone a very well defined rally into the hourly OTE Short SS (94.11) and then a subsiquesnt OTE Short SS setup on the 15minute chart develop (94.15). This got me quite excited and even though I had made a business decision not to trade today (refer to above) I still wanted to try and get a short on up in this neighborhood. I did it in my practice account in exact same fashion I would have done in my combine. It took three attempts to get the short position on and working. The first (and is often the case with me, was a little hasty and ended up failing. The second attempt couldn't punch through the 13ema on the way down so I liquidated on the understanding that any rally away from that moving average would be a short. It made a small amount of money and did prove to be correct (DAMN that 13ema is soooooo good). The 3rd attempt was the charm and turned out to be (in my opinion) the 'trade of the day'. The market spend the rest of the European session working its way lower and ultimately gave me a fill at my pre-determined level (+41) two and a half hours later. The sell-off did go much further but considering my combine size (and the fact that I am only trading 1 lots at the moment) I was more than happy with one full BoT success on the day and a net +32.5 tick balance.
I had a meeting at 8AM pst and another at 10AM pst so I ended up missing the panic low and then the ensuing rally. One could argue there was an oversold OTE Long SS trade at/near 93.14 and then another BoT long entry trade at/near 93.50. But as the old saying goes - wait 10 minutes, there will be another bus along shortly....
