CLG13 - Update for the week of Feb. 22nd to March 1st, 2013

Welcome back to CRI's ongoing Crude Oil Day Trading Blog. Price analysis you see (first chart & commentary) is CLJ13, for the week of Feb. 22nd - March 1st, 2013. Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

 

Market Overview: 

As the pot starts to boil again in Washington we have seen asset prices in general soften and commodity prices in particular break rather hard. The straight line move up from the December lows did seem rather suspicious but not even I expected to see such a violent unwinding to this bull. Over the past month there have been little hints of looming trouble (Commercials turned net bullish two weeks ago for example) and on that change in sentiment a rather well defined double top price pattern was registered. Are institutions caught on the wrong side of the market? Only time will tell, but their overt bullishness (5:1 long over short) seems to have backfired as many have run to the sidelines through this mini melt down bringing that ratio back to just under 4:1 (long over short). Indeed, prices have fallen so much the long side of the market is once again starting to look interesting.

Weekly highlight:  

As for Crude Oil itself, we continued this past week to correct after the well defined double top breakdown in price through the $95.50 area. Two noticable targets remain on the horizon (those being the daily gap at $89.74 and the 4 hour chart bear ab=cd target $89.41) and it feels like we want to ultimately push down into those levels before our next move higher. Having said that, we did just complete an hourly bear AB=CD price pattern (target $90.90) and we are now into the daily OTE Long SS zone ($90.47). We are closer to the bottom then the top. And while it is far too late to sell, at this point it is still a little too early to buy.

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. If this initial trade entry does not work and I still have confidence in the 15 minute price pattern, I will take my 2nd attempt at the trade at the OTE ss (level with stops 4 ticks below previous significant low). The end reult of this second attempt will mark the end of my trading day regardless. I will finish the day either +$140 (+30 stop hit), +$250 (AOCO +41 hit) or $-310 (personal loss limit hit). I want to focus on 5:30AM to 8:30AM trading window and take every setup that occurs during this window of time.

Mental State Review:

Personal issues aside, I am very pleased with both my professionalism and work ethic when it comes to my 'day-trading'. I have a realistic goal, an implementable plan to approach the market on a daily basis and most importantly, an 'edge' I have confidence in. At this point It is really just a question of putting the work in, following the plan and reaping the rewards.

 

Trading Plan: 

This past week I spent working on my trading plan in earnest (pdf document link). While it is one thing to analyze where the market may go, it is quite another to have a working 'day-trading' business model that is implementable. To that end, over the past month I have tried to reduce the amount of my trading and set specific rules as to when to enter and exit the market. As a result of these rather ridged trading rules, I found I only traded three out of a possible five days this past week. While my percentage accuracy was low (at only 50%) I finished the week with a very healthy +$500 net balance on a total of 6 trades. I am learning that it is far more important to leave a winner on to 2:1 risk reward ratio level (and be happy with a 50% accuracy if your first attempt should fail) then continually move stops for paltry gains and be right all the time - a very hard lesson for me to learn.

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/