Following a big selloff this week (a little over 11%) and a breakout sale on Thursday, crude oil futures were primed for a rally today, and the Taylor Trading Technique gave us a good method to identify and trade this setup.
Crude oil got crushed this week, with big selloffs out of breakout setups on Tuesday and Thursday. Thursday’s selloff was especially large, the largest trading range for the previous seven sessions, which smacked of a capitulation. This idea was strengthened by the Thursday night selloff amid news that one of the world’s largest crude oil bulls, Andurand Capital (read HERE) had sold out of its long position.
By the Taylor Trading Technique, the Thursday selloff meant the market had likely pushed below “fair value” and an upside reversal, if it came, would be a good buying opportunity – a Taylor Trading Buy day.
In last night’s edition of Swing trader’s Insight the comment for crude oil was “cover breakout sales, Taylor Trading Buy day”, a comment I reiterated in today’s STI Morning Watch list. For a TTT buy day, we look for an initial move below the previous day low to be our heads up to look for a buying opportunity, and then a subsequent move back above the previous low is our trigger for a long entry.
June crude oil made its session low around 10:30 PM CT last night and was making a higher low around the time the NFP report was released. It subsequently rallied, triggering our long entry around 7:40 AM. If you missed this first entry, it came back and twice tested the reference price level before rallying in earnest beginning around 8:25.
The rally in crude gained momentum over the morning, taking out the previous session high (45.90) around 8:50. It continued to advance, making a session high of 46.65 at 10 AM. The double top made 25 minutes later was a cue to take profits if you hadn’t done so already.
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.
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