Update for the week of June 21st, 2013

Welcome back to CRI's ongoing Crude Oil Day Trading Blog.

The first picture is daily, weekly, 120 minute charts with term structure and CoT summary for the week of June 14th, 2013. The Second picture is the weekly Volume Profile with price overly. Each trading day (time permitting) a 15 minute chart is added and trades for that day are reviewed:

  (courtesy of http://www.sdfanalytics.com/)

Market Overview: This past week saw the June, 2013 options expiry (amid a quadruple witching Friday) come and go with a bang. Few asset classes did well in the face of a reported potential end to the US Federal Reserve Board's QE program but commodities took it especially hard as mass long liquidation brought prices down basically across the board. Yet into that selling, few new trends were established. As we head into the end of Q2'13 and the beginning of Q3'13 it is interesting to see that even amid significant downside price pressure, Energy (ex. Nat. Gas) and Grain markets held recent support levels and even look poised to move higher. Having said that, both our commodity currencies (the Aussie & Canadian dollars) look weak at this point, so I am not overtly bullish of the sector just yet. Indeed, this 'Sell in May and walk away', may take some time to play itself out to fruition.

Weekly highlight: Crude oil this past week hit its daily July bull ab=cd target (and missed August's by less then 10 ticks) and then promptly collapsed into the options expiry. Talking heads may point the blame at Fed talk of an end to QE but my hunch is the market was heavily long and due for a pull-back. The option's expiry itself was the catalyst and indeed prices began to break in earnest Thursday (the day prior to options expiry) and that usually is when the big options players do most of their significant business. Considering TPO's rather small volume prints below $97.25 I do not believe the market has accepted low. I shall be looking for a bounce back to the 50% level (96.16) through the coming week and ultimatly back up into the significant volume nodes in and around $97.25. But, If the market fails to recapture the significant low of 94.29, I shall be looking for price to move below $90 in the not too distant future. 

It is very important to note, given the light holiday sessions and the end of Q2'13, I would be reluctant to hold any position or significant bias in earnest until we are on the other side of the holiday and indeed, the first two weeks of Q3'13.
 

Trading Plan: As I outlined in last week's blog post, I have focused my trades on only one setup now and I find my confidence as risen appreciably. This had been a big stumbling block for me as with little confidence in my setups I was often tempted to 'get out' too early and leave substantial profits on the table. While I did commit that very sin on Friday (took 6 ticks by moving my stop early when +45, my default AOCO level, was hit rather easily) seeing the end result of this setup leaves me with much greater confidence to hold positions a little longer. Indeed, my 3m models suggests one ought to hold a position for at least 4 bars past the momentum double bottom/top. Since it kept on making higher highs off higher lows, momentum would have had me long right up to +100 ticks (wow!).

Here then is a screen shot of that setup (of which I want to concentrate on finding/hunting for through coming sessions):

This is the basic outline for my Momentum trade strategy:

Setup Management

1. Price must have entered a valid 1 to 4 hour OTE sweet spot (70.5% retrace of primary move)

2. 15m & 1hr MA relationships support a profitable trade setup (ie price has room to move to 15m/1hr support/resistance with momentum confirmation

3. Watch for 15m doji (ideally in and around TF trade locations and less then 15 ticks)

4. Move to 3m 

  1. Wait for Momentum divergence/acceptance to develop.

  2. Find 3m VolProfile/Trendline/Gap/AB=CD targets & 15m/1hr MA sup&res/Fib/H&L levels and only enter trade IF reward is at least two times risk.

  3. Draw trend line defined by that range

  4. Price must close 3m bar above/below that trend line for trade setup 

  5. Take position on trade 1 tick below/above h/l of bar that closes above/below trend line & stop (-.15) is above/below 2 previous sig res/sup levels.

 6. When you see valid setup - you must GO!

Trade Execution

1. Enter order on AOCO basis (-15/+45)

2. Once order entered leave to fruition.

Risk / Reward management

1. I can only move my stop once +30 (or twice what I am willing to risk) has been hit

2. I must force myself to consider every time frame (TF trade location) as a possible trade opportunity (5AM pst, 6AM pst, 7AM pst, 8:30AM pst, 11:30AM pst)  

3. Two strikes (-15 ticks each) and you are out (-$310 max loss on day) 

4. Daily goal is +45 ticks (or +$450 profit on day)

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/