CLG13 - Update for the week of March 1st to March 8th, 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: 

On the heels of a better then expected US Employment situation report money flowed out of almost every corner and back into the US. The Fed has gotten what it has wanted, employment is turning and investment dollars are returning to North America. Indeed, even the Canadian dollar managed to 'catch a bid' due to a very strong uptick in its respective employment report. Considering Australia's significant export problem in the face of the collapsing Yen, might there be an long Loonie / short Aussie spread trade in the making here? Weather it be deliberate devaluation or simply an issue of money flows, there currently exists an atmosphere of a race to devalue and as pointed out in this week's CTS Blog Spotlight, this growing inertia may translate into some very big moves. 

Weekly highlight:  

As for Crude Oil itself, prices seem to stabilize this past week. While inventories were relatively bearish, the market kept pressing higher. A wide four hour double bottom was registered on the move through $91.17 midweek and closed Friday on a strong note right at the 50% retracement level of the entire slide. That firm close confirmed a four hour bullish ab=cd price pattern. That patterns implies an upside price target of $93.06. Should that upside inertia hold, additional upside targets include the previous significant peak at $94.46 and the daily price gap at $95.03 (from February) that really ought to be filled in at some point down the road.

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:

I am ready to take the next step and now is the time. Stop making excuses and just trade the plan. 

Trading Plan: 

I floundered this past week and regressed. Valid setups came and went and one trade I did in particular wasn't even close to a 'trading plan' trade. To that end I want to concentrate on getting back into two weeks' ago mind set. I have four trading days left on my current combine. Here the are my commitments for the coming four trading sessions:

1. At 5:30 be at my post with daily sheet setup done and levels predetermined 2. Only consider trade to 60m price target with 1st attempt (15m BoT) & 2nd attempt (15 OTE) OR No Alignment = no trading.
3. Take 2 trades each day = 8 trades in total.
4. No Sim or prac account trading.
5, Hold every single trade to either -15 or +41 AOCO level / 60m target.
6. at 50% accuracy = $1640-$600 = +$1040...

On Friday I am going to take the day and review exactly what I did over the previous four days.

Monday's Trade (1-1)
When I woke this AM, I was greeted with a nice 15 minute double bottom in price. This was coupled with an upwardly pointing hourly price chart and a previously well defined four hour bullish price target ($93.06). On a test of the 13ema (15m) I entered long (AOCO -15/+41) as my 1st Attempt (long) of the day at 91.75. Given 91.60 is my stop, I placed my 2nd Attempt (long) just above the double bottom lows (91.58). These two trades will represent my 'attempts' for today. 

Monday's Trade (2-2)
The test of the 13ema proved to be not enough to turn the market back up. My 1st Attempt (long) was stopped out at -15 (so $-155 net combine). My 2nd Attempt open order was placed a little too low and did not get filled on the initial burst lower. After consideration, I moved that order to the OTE ss level (91.65) and was filled at 91.67. This is my second attempt at trading this AM. Regardless of outcome, this ismy last trade in the Combine trading for today.

Monday Review (2-2): I traded my plan and got smoked!. Both long attempts were stopped out. Net loss on the day -$310.

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/

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/

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/

CLG13 - Update for the week of Feb. 8th to Feb. 15th, 2013

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) will be moving to April, 2013 Contract (CLJ13) this week
Price analysis you see (first chart & commentary) is CLH13, for the week of Feb. 8th - 15th, 2013.
Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

Market Overview: While pre occupied on another project I have admittedly let my futures trading and this blog take a back seat. Interestingly, I am on the last day of my most recent combine and have (in very typical fashion) about a 1% return on assets over the 10 day period. As long as I continue to post positive trade balances, the good people at TopStepTrader will let me continue to roll my combines at no additional charge. Now that the project has been basically finished, I can once again concentrate on this (and my other free blogs) in earnest once again. As was pointed out in today's CTS, it seems to me the market is in the process of shifting money out of Japan and back into Europe. World economies appear to be on the mend as long term interest rates have begun to move higher of late with surging stock markets. As pointed out in my most recent SPY blog entry, one shouldn't get in the way of bull markets as you just might get run over. With that in mind, there really is no telling where/when the market will run out of steam but considering the Yen has now entered an oversold condition on a weekly basis (a rare occurrence in itself) some sort of short term reversal shouldn't be too unexpected.

Weekly highlight: Crude oil prices have basically gone sideways since the end of January in what can currently be only considered a range bound market. Is this a mid-point consolidation (suggesting much higher prices) or the beginnings of a medium term top (suggesting lower prices)? The 1st 2wks Q1'13 Study suggested energy would see net inflows for the quarter and the January Barometer suggested the market should have a positive tone to 2013. But neither of those studies guarantees a straight line move up or down. Until this range is broken $95 to 98 in earnest, one has no choice but to look to either buy or sell extreme range touches. !5 minute turns near $95 ought to be bought while 15m turns near $97.50 ought to be sold.
 
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.
 
Mental State Review: I was relieved to finally finish the project that took me away from the market for the better part of a month. I feel refreshed and focused on the task at hand. I have one day remaining on my current $30k combine and shall finish that Tuesday (Monday is a US holiday) and then start in on a new one immediately after. 

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/

CLG13 - Update for the week of January 11th through January 18th, 2013

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/

CLG13 - Update for the week of January 04th through January 11th, 2013

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....

CLG13 - Update for the week of December 31st through January 4th, 2013

Welcome back to CRI's ongoing Crude Oil Day Trading Blog.
Price analysis you see (first chart & commentary) is CLG13, for the week of Dec. 24th - 28th, 2012.
Each trading day a 15 minute chart is added and trades for that day are analyzed:

Market Overview: Through the holiday season (especial around the end of the calander year) volumes become very light and price action is very choppy. That pretty much described the past week's price action expect for a brief two hour period (on the open of trade Wednesday, the 26th) where price jumped over $1.50. Now that the better part of the Santa Clause rally is behind us, one must now start to prepare for the pending 'fiscal cliff' and its implications. Interestingly, unlike most other markets, Crude prices have remained relatively strong in the face of pending uncertainly. Is this a clue for us traders going forward, or will CL play catch-up first thing Monday morning and join the rest of the market (heading down).

Weekly highlight: Other than a brief two hour period right after the Christmas break, this past week saw mostly drifting price action as both major institutions and a good many retail participants were simply not at their post's. Considering the seasonal presures (Santa and US Presidential elections), it is not surprising to see prices drift higher. Conversly, as we head into January in earnest, one ought not to be too surprised if we (along with the broader market) have to take a few weeks to pause.

Trading Strategy (1 week): As we get back to 'normal' market conditions I am hoping my regularly established trading plan (ORT's) can be executed. I plan to take all NYPit ORTs this coming week. Because I have one day left on my current combine and it needs to be done by the end of business January 3rd, I plan to practice account trade Monday (Tuesday is a holiday) and trade the combine on Wednesday (January 2nd). Once that combine is completed I will being a new one shortly thereafter and will be trading once again full time in the combine.

Mental State Review: Taking too many loses (regardless of real or practice) is very hard on mental capital. Even though I did all my trades over the past week in my practice account (refer to previous week's comments about holiday trading) I found myself incredibly discouraged as one ORT attempt after another failed. Frankly, I was stunned to see two days in a row go 0/4 on the range trades. I knew before hand that trading was going to be difficult, but 0/4 day after day was debilitating. Having said that, loses are a part of all traders life. I have to learn to accept that sometimes you just are not going to win. This is why the '3 strikes' rule is so important. Daily loss limit must not exceed $465 (3 losing trades at 15 ticks each plus $5 commissions per trade = - $465).

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/ 

$50,000 combine finished today 10 of 10 days +$1,710)
Wednesday's Trade: (2-2 +$200)

Review: After a long pause it was nice to get back to regular trading today. Because of the recent concerns I have had regarding the opening range trade (NYPit ORT) and the 7AM PST trade (7RT) I approached today very cautiously. While my regular rule of moving my stop once +20 has been hit works well during 'normal' market conditions, I have moved that to +10 until I see a consistence to the trade once again. So today (as I have made it a habit) I traded both the NYPit ORT and the 7RT when their respective signals were given. I was able to take 9 ticks on the first trade and 12 ticks on the second. After commissions, that left me with a nice +$200 day. Since this was the last day of my $50k combine (day 10 of 10) I was happy to finish the day on a positive note and two additional profitable trades to add to my performance. Since I met the 'roll over' requirements, I will be continuing on into a new 10 day combine starting tomorrow (Thursday January 3rd.). I finished the combine with a profit of $1710 in 10 trading days. I find this really interesting for two reasons. 
1. I switched from the $30k combine to the $50k combine to be able to handle more risk not to be able to trade more/larger. While the larger $50k combine has a profit objective of $3500, the $30k combine has a profit objective of $1,500 - That literally means if I hadn't made the switch (and done everything exactly the same in the $30k combine as I did in the $50k combine) I would be a 'Live' trader today.....WOW.... So why did I make the switch? The number one reason was that the $50k combine has a maximum daily risk of $1,000 whereas the $30k combine has a maximum risk of $500. This is important because I have found it is the perceived 'risk' that effects one's trading. Whether real or not, the fear of getting figuratively 'killed' makes one both really uncomfortable and rather risk-averse (if you exceed the loss limit you instantly disqualify your combine with no possibility of either going 'Live' or even getting a refund/rollover). I found that with the $50k combine (and the $1000 risk level) I didn't even think about hitting my loss limit (because there was no way I could lose 100 ticks in one day) and it didn't effect my trade decisions in the least. I am concerned that with me enrolling back in the $30k combine ($500 max risk) that my focus will be pulled away from making good trade decisions due to risk aversion. I went through this very thing for several months and it should be interesting to see if it happens again. Interestingly, my maximum draw-down through this past combine was $150 on any given day so if I do exactly the same thing through this next 10 day trading period there is no reason why I can't hit the $30k combine performance requirements to be able to go 'LIVE'. 
Just do it Brian!
2. The second thing that jumps out at me is really more from a broader perspective. As a long time registered broker (of which I am not currently) I would have commended any client of mine with a 10 day track record like my past combines'. Frankly, $1710 in profits trading a 1 lot Crude Oil contract (margin of $7,500) with a stated maximum daily draw-down of $465 [3 strikes (15 tick stop) and you are out] and an actual maximum drawdown of $150 is fantastic! These performance numbers are startling to say the least (it boggles the mind when one anualizes these kinds of compounded returns!). If I can acquire a skill set (through this one year plus TsT experience) that enables me to trade my personal account to only half this kind of profitability, I will be better off for it - funded through TsT or not. For the record, I am not really quite sure where TsT comes up with their $30,000, $50,000,$150,000 etc combine numbers because they do not jib with either exchange stated margin requirements (at worst $10,000 margin on a single CL contract) or what I would personally consider acceptable risk per trade. Based on the simple 1/20th or 5% risk principle, if I were indeed working with $30,000 in capital, I would be more than happy risking $1,500 if I knew there was a better than 66% chance of turning that into $3,000.  Here is where I have a fundamental difference with TsT. It shall be interesting to see if running my '3 strikes and you are out' ($465 max daily risk) model can work within the confines of the $30,000 account TsT model (and more importantly the death line - max daily risk of $500.00).

Thursday's Trade (2-2 +$160)

Review: Today was the first day in my new $30k combine. The major concern of mine through this combine is the daily $500 max risk loss limit (as mentioned at length previously). With the above in mind, and my resolve to take each and every time frame range trade, I approached today's trade with a bit more caution than usual. Indeed, I did take both the NYPit ORT 1st leg and the 7RT 1st leg. As per my recent posts regarding the illiquid nature of the RTs lately, I moved my stop up once +10 was hit on both trades. Indeed, neither of the time frame trades moved fluidly - so I got out on the first sign of weakness. The NYPit ORT gave me 9 ticks of profit and the 7RT gave me 8. Net production for the two trades came to +$160. Since I need to average $150/day in production to meet the $30k combine profit objectives I was happy to basically call it a day after the 7RT. I took the attitude that I would do another trade IF an incrediblly juicy setup came along. I didn't really see anything that jumped out at me through the rest of the day so finished with 2 trades on the books and a net production of $160 on the day. All in all, I felt very good about today and the direction my 'hot-dog stance' business is headed.