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I begin my day with the dollar index. We discussed the inflation concerns on our morning prep today. We begin with the 89range chart and we see the following: New short term price channel from the swing high that occurred late Monday night. This new higher high creates the top of the wedge. Middle of the wedge, the BMT is above us, we have a flat trigger line which tells us the dollar is FLAT. Now we need to know what¶s happening RIGHT NOW. Lets us the 13range for the day trading strategy with the Dollar. We are trading in the range below us from last week, which we called to the tick on Monday morning in our morning prep. We now see the dollar index in a transitional area. Will the dollar rise back up? Will it keep falling? This is the BIG QUESTION today. We see a double top on the 13range and this tells me to expect another try at making new highs. We want to buy at support when we se a double top, so keep that in mind. If the dollar drops to the lows (74.635) we can then expect a try to re-test the highs, so use the dollar correlation as your guide. My plan using the US Dollar Index today: If we go sideways inside this range we can trade in any direction we see a strong pattern. There is no bias (no strong correlation) when the dollar is flat. We can still trade these markets with sideways market on the dollar, but it needs to be moving. If the dollar makes new lower lows we will be looking to buy at support and buy with pullbacks on the markets we trade most. If the dollar makes new higher highs we will sell at resistance and sell retracement with new lower lows on the markets we trade most.
830am est We have three news events that are released: y y y Producer Price Index = Higher (costs are going up = inflation) CAD = Higher Retail Sales= Higher than expected
We also hear news from OPEC Sec Gen«. Does not expect to see crude prices to retest the 2008 record high of $147/bbl; IEA should not use strategic reserves as a "weapon" against OPEC- If an oil shortage materializes in second half of 2011, as OPEC expects, prices will surely rise higher. - There was no decision to increase production at recent meeting because some members were uncomfortable with the uncertain outlook. - Does not expect to see another OPEC meeting before
December. What do you think this will do to crude oil? I¶ll bet it rises higher! (and it did!!!) 840am est We review the Crude Oil Futures and begin with the slower, 89Range Chart as our most important levels to work with today. We see the following on the 89range: y y y y y y New Price Wedge, new lower lows Below the major price wedge The BMT is above us, so is the BRN 100.00 Sideways range from 97.80 down to 96.55 Another range from 99.00 down to 96.15 (major) Major bearish price channel (think dotted yellow TL)
My plan of attack on Crude Oil this morning using the 89range chart will be quite simple: If price rises im selling the highs of the range(s) at 97.80, 99.00. If price makes new highs from there im avoiding the big round number and the BMT around 100.00. As price rises im selling at resistance first, and then buying pullbacks with new higher highs. I will not buy at the highs. If price falls im buying at support first and then selling retracements with new lower lows. I will buy support and the range lows at 96.55, 96.15 I will also look to buy the lows of the wedge, the channel, and the ranges. As price keeps dropping I will be looking to sell retracements. I do not sell the lows. We then move to a faster, 34range chart to plan our specific plan of attack. We see the following on the 34range Inside day = above the PLOD, below the PHOD this tells us to trade INSIDE the range we are using now. Avoid the fake-out breakout. Bullish price channel has developed off the lows from Monday night. This means buying pullbacks at support will be the higher % trades until the market flattens out. Wedge Lows are above us. This will drag price up, trying to get into the range above us. BMT is above us as well, which will be another price magnet. So all signs point to short term rising prices this morning on the CL 07-11 contract.
*Contract rollover will be Wednesday/Thursday this week on CL 07-11 to the CL 08-11, watch the volume. Our plan of attack with this information on crude oil: Buy the lows and sell the highs b/c of the inside day Look for buying at support, and then buying pullbacks using this bullish trend and the magnets overhead. Don¶t get µmarried¶ to the long side, keep the eyes open b/c this week is OPEX and Quad Witching and anything can happen, especially with the dollar trading possibly sideways this morning.
945am est The market has been VERY good to us this morning earning over 100 ticks in less than 2 hours of trading. Now the market is looking a little confused. Crude Oil is trading in the price channel, we have been selling the highs and buying the lows with this inside day. Gold is trading around the 89range BMT and is looking very sloppy. US Dollar Index has a DOJI candlestick which tells us µindecision¶ on the DX 09-11 contract. This lack of direction from the DX will result in lack of direction on the markets we trade. The personality is getting a little more difficult to read the market¶s intentions. Lets be careful 1025am est We¶re headed into the dead zone ahead of the speech from Ben Bernanke at 230pm EST. We don¶t have any more news, so lets stay patient and only take the trades that fit our plan. Our plan on crude oil after 1030am: Inside day, so sell the highs and buy the lows, avoid the fake-out breakout. If price rises im selling 98.25 resistance, and then looking to buy a pullback above that level. Take profit, or look to sell at 98.50, then look to buy pullbacks above that level as well. I will be watching momentum VERY closely today as we make new higher highs. If price drops im selling the highs of the price channel below 97.84 (21r trigger line) We get a really big drop below 97.70 (34r trigger line) so look for the highest % trade short below that level. Targets on the way down will be 97.40, 97.13, and then 97.00 is the lows of the channel.
1030am est The dollar at the LOD, and we wonder which direction will it go? Higher or lower? This will tell me what to do next. If dollar rises, im looking to sell crude oil below 97.84 If the dollar falls to new LOD we then look to buy pullbacks on crude above 98.25. 1100am est We see lower highs and higher lows on crude oil, and with the speed less consistent and the news later today (230pm) we know to beware that time is NOT on our side.
Review Gold Futures: 89range chart is the most important price levels so we start there first. We see the following: Price Wedge, we are near the lows Sideways Range(s) and we¶re near the highs BMT is below us, 1514.6, at the lows of both the ranges and the wedge. Transitional area is below us. (trigger zone) In the middle of the major sideways range
We can see a macro view with the 89range and it tells us that TODAY we in the middle of the major range, which means buyers and sellers will be competing over WHO HAS CONTROL. This will lead to sloppy price action, lack of µfollow through¶ and no easy personality to pick up on. The Gold 34Range chart shows us: Inside day = buy the lows, sell the highs, avoid the fake-out breakout. Bear Price Channel, sell the highs as high % Sideways Range, sell the highs at 24.9 AND BUY THE LOWS 14.5 Avoid the OPEN at 21.0 and avoid the middle of the ranges.
For more information please visit: www.schooloftrade.com and www.sidewaysmarkets.com
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