This is a sample entry from Don DeBartolo’s email newsletter, Trade Spotlight: Spreads, published on Tuesday, March 06 2018.
There is a spread trade opportunity in Crude Oil. Shorting a spread of futures contracts on a breakout of a strong lower Trend Line. The Trend Line touches several points going back to the summer. There is a seasonal tendency to be short this spread through March into April. The stop loss will be placed above recent session highs and the 20-day Moving Average. The target is near the bottom of the Trend Line and prices dating back to one year ago. See chart below. The MACD indicator is bearish and the Stochastic indicator shows some downside Momentum.
Establishing a bearish spread position where a front month contract is sold and a deferred month contract is purchased. Anticipating this spread to narrow to zero, then widen negatively. Setting up a futures spread will potentially reduce the risk and volatility in this energy market.
Sell the May 2018 / Buy the August 2018 Crude Oil spread at 1.15 using a stop order, GTC.
Initial Margin = $462 Maintenance Margin = $420
If filled:
Stop loss: Stop loss is 1.75 points initially, then trailed lower, GTC. (Initial Risk: $600))
Target: Target is -0.50, near the bottom of the Trend Line, GTC. ($1,650)
Crude Oil Spread Chart from Bar Chart
Contact your Daniels Trading broker by phone or email to place this trade.
Risk Disclosure
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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