CLU12 - Update for July 27th, 2012

Price analysis for the week of July 27th, 2012:

Market Overview: The very normal seasonal correction (Sell in May and walk away...) has played itself out in rather typical fashion. Those 'weak hands' that bought through the spring rally have probably exited the market by now and the normal seasonal summer bottom has come in. Considering current drought fears too, it should not surprise us to see Natural Gas moving higher through the summer 'air conditioning' season as well.

Trading Strategy (1 month): As has been the case for a few weeks now, I have been looking for a technical 'bounce' back into the mid $90 range (daily 50% levels) and I wouldn't be surprised to see $100 tested over the course of late summer. Since $100 is such a big fat round number it shall act as a magnet should the mid 90's be breached in earnest. Having said that, $91 to $95 area should represents a significant resistance zone and may take a few weeks to penetrate..

Trading Plan for this coming week: Daily momentum indicators are currently in a bear divergence (meaning price is moving to new highs but momentum is not). Because of this, one ought to temper their bullish enthusiasm until resolved. Additionally, price is in a very tight trading range on the weekly charts (between $86.84 and $93.25). Until either of these levels are broken I shall be looking to buy dips into the high 80's and sell rallies into the low 90's.

 

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. Additionally, my primary goal for this coming week is 'process goals'. In that I want to create an algorithm trading style wherein the same process is repeated exactly the same way for every trade.

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.

 

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. 

 

Comment 1. While I have noticed that quite often the market will come back and re-check the entry price, I am happy with this approach as it 'guarantees' a risk free trade on the remaining 1 contract. And in this business, as soon as one can get themselves in a relatively risk free position, the better. The question is, any trading model must have a positive win/loss ratio where your winners substantially outweigh your losers. Under the original plan (selling 1 at +10 & the second at +40) the win loss ratio is about 2:1. Even using a system that is only 50% accurate, one still will come out ahead in the long run - quite nicely i might add too. I pride myself on being about 70-75% accurate in my targets. So under this 2:1 win/loss ratio I should do quit well. BUT by moving my stop to b/e+1 on the remaining 'low risk' position (after selling 1 at +.10 right away) I wonder if I am limiting my system's performance as I find that (as mentioned above) price does often come back down and re-check the entry level. On what often inevitably becomes yet another correct price prediction, I end up with a gain of $100 rather than the $500 originally planned for. Something I must give serious consideration to going forward.

 

Comment 2. This past week I found I lost focus on two specific days and ended up costing myself more than $1500 in losses. I find that 90% of the time is spent correctly analyzing, waiting for setups and then appropriately following a process on order execution. The other 10% of my time is unexplainable at this point. it is quite remarkable to look back and try to understand myself during these period as trading is impetuous, hasty and illogical. And of course it all leads to dramatic losses. It has been suggested that emotional journal writing (assessing my feelings) throughout the day, at the end of the day and then at the end of the week (both my mental state and market state) might be a good approach going forward. My goal then for the coming week is the appropriately journal my feelings during the trading day to see if there is a pattern to my behavior (especially during these 'blow-up' periods}.

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/

CLU12 - Update for July 20th, 2012

Price analysis for the week of July 20th, 2012:

(Rollover to Sept. Contract - CLU12)

Market Overview: Specifically with regard to Crude Oil, tensions within the middle east seem to be trumping horrible economic trends/data world wide. Very interestingly, dramatically changing supply & demand structures are in play at the very same time. From the demand side, global recessionary fears are building and the Euro zone has yet to deal with an overwhelming debt burden that may drag the entire region into economic upheaval. From the supply side, several conflicts within the Middle east (one of which may directly effect Crude Oil's consistent flow of supply out of the Persian Gulf) seem about ready to boil over. This is serious stuff; lets hope it doesn't ignite a global war. Frankly, I am extremely cautious at the moment. In my weekly CTS commentary I have suggested 'investors' stay in cash for the next six to twelve months as literally anything is possible from week to week and month to month. Given too, the dramatic change in both the supply and demand structures, I don't think anyone can clearly put a fundamental value on the commodity at the moment. As a result, prices can and probably will move in absolutely incredible increments as traders somehow try to put a value on any new flow of fundamental news. Heaven forbid we get a nasty hurricane in the Gulf of Mexico this year....

Trading Strategy (1 month): While Investors have the luxury of just sitting in cash for months on end, we traders do not. We need volatility to make money and oh boy do we have that. Late summer is seasonally an ok time for the market and given the upcoming US presidential elections (Nov. '12) I find it hard to believe we are going to break too hard from current levels. Having said that, the bottom of the current trading range ($80 area) is over $10 away, while the top ($95 area) is less than $5 away. This suggests we are vulnerable to a bit of a correction over the coming sessions and that is what I am looking for going forward. I shall be looking to sell rallies into the $95 area and buying sell-offs into the $85 area.

Trading Plan for this coming week: As mentioned above, short term momentum indicators need a bit of time to clean up before the next leg higher. While they do, a 50% correction of the 5 day up move would suggest $90 as a reasonable target. As well, the original 'C' point in our daily ab=cd bull pattern has yet to be checked in earnest. That low (84.05) ought to be tested.

 

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. Additionally, my primary goal for this coming week is 'process goals'. In that I want to create an algorithm trading style wherein the same process is repeated exactly the same way for every trade.

Process outline: On 15m signal, enter order (on stop) to take a position on 2 (two) contracts (AOCO.....-06 [for total risk of $130] / +10 & +40). 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. 

 

Comment: While I have noticed that quite often the market will come back and re-check the entry price, I am happy with this approach as it 'guarantees' a risk free trade on the remaining 1 contract. And in this business, as soon as one can get themselves in a relatively risk free position, the better...

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/

CLQ12 - Update for July 13th, 2012

Price analysis for the week of July 13th, 2012:

Market Overview: While we have yet to actually register a new working uptrend, there are growing signs the Crude Oil market wants to stop going down in price. Having said that, one wrong statement out of Europe and prices could fall dramatically. There are often little windows in the market when it is very risky to be long or short. In my opinion, this is such a time. 'Investors' ought to be very cautious over the coming six months as both fundamental and psychological changes are potentially on the horizon.

Trading Strategy (1 month): As has been suggested previously, some sort of technical bounce off the extreme lows of 77.28 ought to be expected going forward. Indeed, we have rallied more than $12.00 of the low and are currently sitting in a sort of 'no-man's land'.

Trading Plan for this coming week: Look for a resolution to the near term (60m) double top price pattern and a move back to the 60m 50% level (near $85.60). A break below $83.65 suggests $77.28 ought to be tested while a break above $88.98 suggests the $95.00 area is a realistic expectation. Until either of those levels is broken (on strong momentum) I shall consider this a trading range market and look to buy the bottoms and sell the tops.

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. Additionally, my primary goal for this coming week is 'process goals'. In that I want to create an algorithm trading style wherein the same process is repeated exactly the same way for every trade.

Process outline: On 15m signal, enter order (on stop) to take a position on 2 (two) contracts (AOCO.....-06 [for total risk of $130] / +10 & +40). Once 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). Once the first exit order is filled, the stop/loss on remaining one (1) contract is moved to b/e+1 tick....

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/

CLQ12 - Update for June 29th, 2012

Price analysis for the week of June 22nd, 2012:

Market Overview: While the daily bearish AB=CD pattern is still active (target $76.33) Friday's violent reversal in price does suggest we are closer to the bottom of this trading range than the top. Considering the very normal nature of this seasonal correction, one does have to ask if this sell-off was getting a little over done. Was this a coordinated move on the part of money managers to square their short positions heading out of Q2'12 (Friday was the last trading day of the quarter)? Can the broader market rally be attributed to European leaders finally getting their collective heads around their banking crisis? Only time will tell, but I myself would be a bit reluctant to declare a bull market just yet. Considering too that we are now into the First 2 weeks of Q3'12, I myself will be watching more than trading as we see where international money managers expect this quarter's action to take us.

Trading Strategy (1 month): As previously suggested, considerable damage has been done to the Crude Oil bull. While we may see some violent price action over the coming sessions, it by no means signals we are heading up in earnest any time soon. I do expect some sort of 50% bounce of the spring sell-off (which ought to bring us back up into the low 90's) but after than my bullish expectations shall be dramatically curtailed.

Trading Plan for this coming week: Look for a consolidation of Friday's rather dramatic rally. Should we resolve higher, look for the daily resistance points to be tested in earnest ($85.89 & 87.32). Should we fail, look for a 50% retracement of the rally ($81.31) and if that fails look for a test of the bottom ($77.28).

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..

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/