The crude oil futures had a breakout setup for Wednesday, as we often see on the day of the weekly EIA petroleum inventory report. It’s one of my favorite times of the week to look for a trade, as the report often generates a large market move. This week, after Friday’s big upside reversal (I wrote about that HERE), crude consolidated on Monday and Tuesday, setting itself up for an impulse move today.
In this morning’s watch list for Swing Trader’s Insight I reiterated that we should look for a breakout move, with 46.98 (Monday high) as the upside reference price and 45.50 (Tuesday low) on the downside. Although an upside move appeared more likely because of yesterday’s bearish action and the bullish level of ROC, I’ve found it’s best to keep an open mind as to direction on a breakout day.
The 9:30 AM EIA report was bullish- crude oil stocks fell by 5.2 million barrels last week (vs. an estimate of a 1.8 million barrel drop) and gasoline demand rose. This data push the market higher, and our long entry was triggered after the report release.
The initial stop loss for our trade could have gone in the 46.50 area, the lows made just before the report release. In this case it didn’t matter, as crude rallied over the morning, moving up in a characteristic “3 Pushes” pattern before making a session high of 47.78 around 12:30 PM.
Essential Guide for Futures Swing Trading
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