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
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