The crude oil futures had a breakout setup for today. This was logical, as the OPEC meeting was concluding this morning. The breakout setup gave us a pattern to trade; OPEC gave the catalyst for a tradable move.
In last night’s edition of Swing Trader’s Insight (STI) I labeled July crude oil as a breakout setup. There were two patterns that told us this. First, Wednesday saw significant range contraction; the range was 70% of Tuesday’s range. Second, Wednesday was a doji bar. These patterns indicated a lack of directional conviction on Wednesday, which was likely to be resolved today, after the OPEC meeting ended.
When I wrote the morning comment for STI I pointed out that there was an overnight double bottom just above $50. This was significant as $50 was important support; a break below this level would likely lead to more downside. (See the daily chart above) Normally we would start with the previous day high and low as breakout reference prices; as the market so far below there this morning we needed to find a lower reference level.
$50.00 was taken out around 10:35 AM, triggering the short sale. The initial stop loss would go back some distance above $50; for a breakout trade we want to see only shallow pullbacks from the direction of our trade.
Crude futures really fell apart after $50 was broken, reaching $48.75 in about 45 minutes. It continued lower, making a series of lower highs and lower lows into the afternoon and closing near the session low.
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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