Today the crude oil futures were on the Buy day of the Taylor Trading cycle. I like to look for trade opportunities after the 9:30 AM EIA report; there was a good combination of time and price for a setup this morning.
Last week I wrote a report about what I believe are going to be the dynamics of the futures markets with the new world of the Trump Presidency (you can get a copy of that HERE). Executive summary: I think we will see more cyclical market behavior in that we will have times when the markets show big moves and a lot of volatility separated by periods when the markets trade fairly quietly and don’t exhibit much directional movement.
This means there are likely to be periods when there are fewer trade setups, meaning fewer trade opportunities and fewer trade setups to write about for new STI followers. As is often the case, the Wednesday crude oil inventory report was “Old Faithful” for providing a trade opportunity. Crude oil futures had a Taylor Trading Buy day signal for Wednesday following a downside breakout on Monday and follow through on Tuesday.
On a Taylor Trading Buy day we normally look for a failed move below the previous day low to serve as our trigger for a long entry. However on days that markets have report releases or the like (something that is likely to cause a big market move) I wait until after the report / event before I will look to put a trade on. If you carry a trade into a report you not only limit your ability to trade based on the market reaction, you also risk getting stopped out if the market makes a whipsaw move.
By waiting to trade after a report / event, we give ourselves the opportunity to take advantage of the emotional trading of others, which is a part of the underlying philosophy of the TTT. That’s what we were looking for with crude oil today, especially given that crude has seen an emoti0nal selloff in the past week, which coincided with the EIA report and a Taylor Trading Buy day today.
As I said in the Swing Trader’s Insight Morning comment, we could watch the 2017 low of 47.71 (basis CLK) to serve as a Buy day reference price. In addition, we could also watch the overnight low as another reference price.
The EIA report release initially led to a selloff, pushing crude down to a session low of 47.01. “Sell the rumor, Buy the fact” kicked in here as the selling dried up and the market rallied back above our reference prices, giving two long entry triggers. The initial stop loss could be placed below the session low, and the rally gained steam over the course of the morning.
The market’s inability to clear the overnight session high of 48.24 was a good cue to take profits, although the market looks like it will close relatively firm, which is often an indication it may see upside follow through this afternoon.
I was watching crude oil both for a trade opportunity in that market as well as using it as a cue for the stock index futures today. Stocks were on a Buy day signal as well; they followed crude oil up this morning before the break off the London attack news; they seem to be regaining strength late in the session.
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.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.