CLG13 - Update for the week of Feb. 15th to Feb. 22nd, 2013

Welcome back to CRI's ongoing Crude Oil Day Trading Blog. We have officially rolled to the April Crude Oil Contract (CLJ13)
Price analysis you see (first chart & commentary) is CLJ13, for the week of Feb. 15th - 22nd, 2013.
Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

Market Overview: After a torrid beginning to 2013 one ought not to be too surprised to see some weakness come into the market as it gets ready for the next round of political turmoil out of Washington. Interestingly, these recent 'tops' came in right at expected resistance zones suggesting this market is far more orderly in nature than what the day to day action would suggest.

Weekly highlight: As for Crude Oil itself, this past week saw prices finally break the long established narrow sideways channel (98.50 to 95.50) that had dominated trade over the past month. Within two trading days the market repriced itself from about $97.50 down to $92.50. While further downside targets do remain (coupled with poor momentum readings) one might argue some sort of reactionary bounce ought to be expected from the rather dramatic plunge. While too early to declare a working bottom, a rally back into the 'brick wall' near $96 shouldn't be unexpected.
  Trading Strategy (1 week): BoT (Break out Trades) I am very comfortable working with my 15m charts and playing double bottoms & tops for moves to either 50% levels or OTE sweet spots. Ideally BoT entries come at or near hourly OTE ss levels. The key with BoT's of late seems to be to only enter a position on a touch of the 13ema following the double top/bottom. Most trades take less than 10 ticks of heat and easily move +30 ticks in the trend's favor. So with this in mind, my trading strategy is to concentrate on BoT entries at or near hourly/4hr OTE levels. I want to focus on 5:30AM to 8:30AM trading window and take every setup that occurs during this window of time. That is my #1 goal for this coming week.  
Here is a really nice example of one of my BoT trades, how it should have been executed and what I did.
What should have been done (Notice):
1. The origional double bottom in price confirmed by momentum & volume (96.95 area).
2. The 13ema touch 7 bars (1 3/4 hours) later - buy at 97.10 AOCO (-15/+41).
3. Trade took less than 7 ticks heat.
4. AOCO +41 would have been filled next bar.
result: quick trade for relatively little risk
What I did (Notice):
1. I bought on late reaction & subsequent breakout (97.27).
2. Which was far away from the 13ema = poor trade location = mistake.
3. Which led to panic on realization.
4. Which led to getting out at small gain on 200 sma touch at 97.40 (+13). 
 result: I took 13 ticks when there was easily 40 or more for the taking.
 

So what can I take from this review?
1. I have confidence in my 'edge'. I believe.
2. I understand the mechanics of the trading process with appropriate risk/reward levels.
3. I understand my daily risk tolerance (3x15 tick strikes and you are out) and am happy working within the model.

4. I have NOT committed myself to my trading plan. I must commit to it to succeed and this is were I need work.
  
As stated last week:  I want to focus on 5:30AM to 8:30AM trading window and take every BoT setup that occurs during this window of time. That is my #1 goal for this coming week.  
 
Mental State Review: This past week was a poor showing for me. As pointed out in last week's blog, other issues are dominating my personal life right now so it is very hard to commit the time and mental energy to trading that I would like (and really need to) to be successful.  I know this is a long road and there are no easy short-cuts to learning how to trade properly. So with that said, I am committed to the task at hand and will endevour to work through personal problems and not let it effect my trading.....(wish me luck...lol).
Trading Plan:1. BoT (momentum): 
Determine both upper and lower OTE ss entry points on higher time frame (Daily/4Hour/1Hour charts). Find price breakout (typically double bottom/top) 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/