The weekly EIA petroleum inventory report is normally released on Wednesday mornings; it often gives trade opportunities regardless of what the market is doing ahead of the release.
Today was a good example of how a report release could yield a trade in spite of the pre report action. In last night’s Swing Trader’s Insight advisory, crude oil futures were labeled a Taylor Trading Technique Sell day for Wednesday, following a small recovery (TTT Buy day) rally on Tuesday. On a sell day we would normally anticipate a continuation of the previous day up move, looking for the market to reach back up to the previous day high.
By the time I was looking at the market this morning, crude was not following a TTT Sell day script. Last night it opened roughly unchanged. It was unable to regain broken support at 63.72 (Dec. 1 low) and then sold off, working its way below the Tuesday low of 62.25. This was why I pointed out in the morning STI watch list (read it here) to look for a breakout trade opportunity this morning.
For the 9:30 AM CT report we could look for a breakout move after the release. I used the pre report session low of 61.82 as a downside breakout level and (if it had occurred) Tuesday’s 62.25 session low as a reference price for an upside breakout.
The report proved another reason to sell crude oil as inventories unexpectedly rose last week, when a decline had been expected. The drop below the 61.82 was our trigger for the breakout short sale; and the initial stop loss could go above the 62.25 resistance.
The report was gasoline on the fire for the selloff. The immediate post report low was 60.88 and it proceeded to make lower highs and lower lows, reaching the 60.45 session low around 10:45 AM. This pattern told patient traders to stay short as it indicated the down trend was still in place.
Essential Guide for Futures Swing Trading
In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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