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/

Update for the week of June 14th, 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: Has the monster correction within the European currency space finally come to an end? This past week\'s price action would suggest so. The Euro and B. Pound are now pointing higher and the Swiss Franc looks to be shortly along the way. Interestingly, the only sector within the commodity space that looks like it wants to follow along is the energy complex (ex N. Gas). Within that space Crude Oil and Heating Oil look ready to go with Rbob trying to turn as well. Sadly, looks like the consumer is going to feel this summer\'s rise in energy costs right in the pocket book. But in the same breath, that rise in energy prices may act as a natural break on the economy relieving the US Fed from having to do too much heavy lifting.

Weekly highlight: This past week saw the Crude Oil market finally breakout to the upside. This consolidation has been very long and and trying for day traders. We now may be entering a 'trending' market which makes for some interesting 'trend following' trade opportunities. Considering the Geo-political situation around the middle east, a test of the $100/barrel level shouldn't be too unexpected. Considering too the overtly bullish stance the 'smart money' has had for some time now, it looks like they are finally going to get paid for their patients.
 

Trading Plan: I am following my trading plan (pdf link) closely of late and that in itself is a good progression. My trades this past week were defined and disciplined. Having said that, it would appear that some of my setups are still a bit vague and need work. I took a 'panic' setup early in the week only to see if fail after realizing the trade I took was on the heals of a completed 'panic' trade just a few hours previous. I took an OTE long in the face of a very bearish 15m momentum backdrop and that trade too failed (-28 ticks total on the two trades). The following day (Wed.) I again followed my plan and took the 7AM range trade in which I took both legs of the trade setup heading into the weekly EIA inventory report which in itself wasn't a smart chance to take (-32 ticks). I made up ground on Thursday with a very well timed momentum trade that netted +32 ticks in just under 2 minutes.

With this experience in mind, I think I am going to concentrate on the one solid setup I have working at the moment and that is my momentum trade. 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 are in same direction with momentum confirmation

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

4. Move to 3m 

  1. Wait for Momentum divergence/acceptance to develop.

  2. Draw Fibs off previous swing range - 38.2, 50 & 70.5

  3. Draw trend line defined by that range

  4. 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.

Find VolProfile/Trendline/Gap/AB=CD targets and only enter trade IF reward is at least two times risk.

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/

Update for the week of May 17th, 2013

Welcome back to CRI's ongoing Crude Oil Day Trading Blog.  Price analysis you see (first chart & commentary) is CLN3, for the week of May 17th, 2013. Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

 

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

Market Overview: 05/17/13: The recent bullish reversal in the US Dollar index continued this past week and has now confirmed (in my mind) the bullish scenario laid out in previous blog posts. With both ECB & BOJ on aggressive easing programs, the North American economy looks to be relatively attractive and indeed money is pouring into US dollar denominated assets. Of particular note, the Aussie dollar is now racing lower in a bid to play catch-up to the Yen. Additionally, from a macro perspective, things are taking a hawkish turn in Syria suggesting a global war premium is being built back into the market, something we haven\'t seen for some time. 

Weekly highlight: This past week was tough because of roll. We are now into the July contract and daily price objectives near $99 still remain in place. VolProfile data suggests peak interest near 94.10 & 95.10 with a significant valley around $94.50 which happens to be right around the 2 hour 50% level. Considering seasonality, a period of consolidation wouldn't be too out of the question and considering too the significant bullish breakout in the US Dollar index, my upside expectations will be limited over the coming weeks.

Trading Plan: I got away from my trading plan on Tues. & Wed. and it cost me several hundred dollars. I understand that I just simply can't take a position in Crude unless I see a valid setup. I got impatient and ripped apart. To that end, I will try and refocus my attentions to only take valid trading plan setups.

Setup Managmenet

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

2. Watch for 15m momentum confirmation of bottom/top & 15m OTE trade location.

3. Move to 5m and identify time zone trade locations and levels.

4. Move to 3m to find VolProfile/Trendline/Momentum/Candle trade locations and only enter trade if target is at least three times risk on trade.

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 zone trade location as a possible trade opportunity (5AM pst, 6AM pst, 7AM pst, 8:30AM pst, 11:30AM pst)  

3. Three strikes and you are out (-465 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/

Update for the week of May 10th, 2013

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

Price analysis you see (first chart & commentary) is CLM3, for the week of April 22nd to April 26th, 2013. Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

 

 

I don't have time this week to add commentary, will try to add through week.

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/

Update for the week of April 22nd to April 26th, 2013

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

After taking a month off from writing this blog I thought it was about time to update it.

Price analysis you see (first chart & commentary) is CLM3, for the week of April 22nd to April 26th, 2013. Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

Market Overview: 04/26/13: As the US Dollar continues to resolve around the important 83-84 level few new commodity market trends have been established over the past week's trade. As the month of May approaches we can clearly see the market shifting out of a 'fall/winter' stance and into a 'spring/summer' one. Equity markets have had substantial seasonal rallies, commodities and commodity currencies are failing and interest rates appear to be bottoming. These are all hallmarks of a typical seasonal peak and this is exactly the time of year it is supposed to happen. So ironically enough, while some price action may seem a bit chaotic at the present, things are actually quite normal...

Weekly highlight: The long consolidation between $89 and $98 resolved itself bearishly two weeks ago and the market spent the past week trying to recapture that range. On the heals of a relatively benign inventory report, potential escalation of Western involvement within Syria and numerous terrorist threats (some real and some not so) price raced back up to the 50% level of the sell off and then consolidated into the weekend. Given the seasonal nature of the energy market and the Commercial's current net bearish stance,  I am looking for the market to run into some serious resistance above $94.00. Having said that, once on the other side of this seasonal window (mid June) I shall be looking for the Large Institutions to get paid as they have remained net long (currently at about a 4:1 basis) for some time now as price has either gone sideways or higher over the past couple quarters. Not surprisingly, it would seem $100.00/barrel is our collective 'line in the sand' for the resumption of the previous bull market.

Trading Strategy (1 week):
Initially, I will be looking for a test of Friday's highs. Should those highs be taken out then I shall look for an ultimate move up to fill the gap at the top of the recent Daily trading range. If Thursday's highs prove too much of a barrier, I shall be looking for a test of the 50% level (on the 2 hour chart) and then an ultimate move down into the OTE Long Sweet Spot. A move down into that area ought to represent an interesting long trade location.

 

Revised trading plan with short term filter: 

I have spent the past month studying the 5m chart in detail. I have found that trend line breaks at VolProfile pivots are good entries. So in conjunction with both my Time Frame setups (5AM, 6AM, 7AM & 8:30AM pst) I will use my BoT signals (15m & 1hr chart agreement on trend) to generate directional signals. I will then refer to the 5m chart to take positions. This means I may not take each time frame setup and must remain vigilant throughout the entire trading day as these trend line breaks can happen at any time.

 

Mental State Review:
I have been taking it very slowly of late in my Crude Oil day trading (I havn't even posted a note to this blog in over a month). I have created an 'algo' that identifies option positions where the market pays you to take a position. It has been very hard for me to stomach the kind of risk one has to take trading futures in the face of almost no risk option trades. It has been interesting to see how my internal reaction has been to distance myself from 'risky' futures trading as I watch this new algo go to work. Anything one does in the market should be 'fun'. If it isn't then work becomes very unattractive on a daily basis. I have found the margin of error in trading Crude Oil Futures contracts is so small that many days it just isn't fun and almost seems like a perpetual trap...

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/

Update for the week of March 15th to March 22nd, 2013

Welcome back to CRI's ongoing Crude Oil Day Trading Blog. Price analysis you see (first chart & commentary) is CLk13, for the week of March 15th to March 22nd, 2013. Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

Market Overview:
03/22/13: The US dollar index this past week showed signs of fatigue any time it pointed its nose above 83.00. As previously mentioned, 83-84 represents a significant battle zone for the index and its ultimate resolution ought to give investors a guide as to 'fear' vs. 'greed' expectations for the coming weeks and months ahead. Given this is Japanese fiscal year end, we may see trend resumption once on the other side of that event. Interestingly too, that event will mark the beginning of Q2'13 and we shall be given yet another brief glimpse at what fund managers are doing with their new capital. Elsewhere, the professor of economics (HG Copper) had something to say this past week. While still contained within a larger channel, Copper prices registered a weekly double top breakdown suggesting lower, not higher prices ahead. With that in mind I thought we ought to take a look at what is going on there in this week\'s WCTS Blog.

Weekly highlight:
The ill-liquidity of the Japanese fiscal year end has played heavily within the energy space. Volumes have dried up and volatility index's are at or near historic lows. Energy prices in general and energy stocks in particular started the week off on a poor note but attempted to reverse higher heading into the weekend. Indeed, USO itself registered a rare "DI' buy signal (where both the short term and medium term DI trending signals occur at the same time). Given this reversal type action and the fact that the '1st 2 weeks' study of Q1'13 suggested energy and commodities in general would do ok through the quarter, I am actually expecting a bit of a rally over the coming week. Considering May Crude oil's significant gap at 95.65, I shall be looking for that level to be traded to over the coming sessions. Considering too the general overt bullishness of institutional holding at the present, I wouldn't be surprised to see a burst higher through the first two weeks of Q2'13...

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/4 hour 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.

Revised trading plan with short term filter: As per my revised trading plan (trading plan April, 2013) I now shall consult the 3 minute chart before 'pulling the trigger'. If the 3 minute chart has yet to turn then I shall wait before blindly buying/selling at either Setup 1 ('edge') or Setup 2 (OTE SS). This may mean being a bit more patient in getting in but I like the idea of the 3 minute chart confirming short term momentum and volume are with the trade setup. I was finding just blindly buying at a certain level left me with a lot of anxiety and using this latest filtering method on Friday both filled me with confidence and relieved that anxiety.  

Mental State Review:
While I believe I am ready to take the next step my trading of the past week does not confirm this. I need to be more focused on executing in the setup zones and not making excuses to not perform. The plan is good and I know it works - trade the plan...  

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/

Update for the week of March 8th to March 15th, 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 March 8th to March 15th, 2013. Each trading day (time permitting) a 15 minute chart is added and trades for that day are analyzed:

Market Overview:
The US Dollar index itself is at a very interesting cross roads here. As pointed out in this week's WCTS Blog, we are either at the end of a bearish Bat harmonic pattern (which would imply lower levels from here) or we push up through the 2012 summer peaks (suggesting much higher levels to come). Regardless, the area between 83 to 84 is a very important one and I for one will be keeping a close on how it resolves. While the bond market has yet to be convinced the North American economy has indeed turned, equities are enjoying what appears to be a flight back-into-risk. The fact that all world indices tracked are now pointing higher suggests we are closer to the end of this run then the beginning. Considering seasonality, I wouldn't be surprised if the spring/summer of 2013 marks an important peak. Interestingly, the rally itself is coming from unexpected sectors as our ABG trade (AAPL, Bonds & Gold) takes a break. Indeed, out-performance from sectors like pharmaceuticals shouldn't come as too big a surprise given CRI's 1st 2wks of Q1'13 study suggested that would be the case. Have the metals been beaten up a little too much? Recent WDB Options Model screen results would suggest so as several 'get paid to take a position' trades have emerged of late.

Weekly highlight:
While energy stocks continue to move higher with the broader stock market, Crude oil itself is having a hard time getting going in earnest. We did put in a very tight double bottom (with an associated 'buy' level on the 4 hour charts at 91.60) two weeks ago. This past week confirmed that bottom by moving higher. That bottom was rather 'V' shaped on the daily charts which suggests we ought to at least trade down into that area once again to see if prices really do want to reject moving lower. As for upside objectives, both the daily 50% level and a rather noticeable gap areas are looking to be traded to. Bullish enthusiasm should be tempered at present (as the weekly chart above points out) as price continues its two year consolidation. At some point this market is going to break out and it will be violent. I don't know if it can do so this year before the typical seasonally bullish time of year for commodity prices in general ends. Having said that, May is still two months away and anything can happen before then.
 

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:
While I believe I am ready to take the next step my trading of the past week does not confirm this. I need to be more focused on executing in the setup zones and not making excuses to not perform.
 

Trading Plan:
For some reason I checked out this past. I got stopped out on Monday at my personal loss limit ($-310) made the money back on Tuesday ($+325) and then did literally nothing for the next three days. Finally, late on Friday (more out of frustration then anything else) I took a questionable setup and got stopped out for a $155 loss. So I chewed up three days of my combine for a net $-155 on the week. While not a disaster, I could have done a lot better...

Once again here are my goals for the coming week:

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 = 10 trades in total for the week. 4. No Sim or practice account trading. 5, Hold every single trade to either -15 or +41 AOCO level / 60m target. 

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/