CLV12 - Update for August 24th, 2012

Price analysis for the week of August 24th, 2012:

Market Overview: Prices felt like they were nearing exhaustion into the end of this past week. The market did get a boost from very dovish comments from the US Federal Reserve (through the release of the Fed Meeting Minutes). As a result, the US dollar lost a good deal of 'rate' premium and even went as far as to price in a resumption of the very controversial 'quantitative easing' program. Should a QE3 begin in earnest, one ought to expect a dramatic escalation in prices very similarly to our last two rounds. Indeed, gold and silver both seem to be pricing in a reversal of previously dis-inflationary policy and a resumption of US dollar devaluation. Not only have prices based but we may actually be setting up for a substantial move higher. Oh, did I mention, the S&P 500 is at a new 52 week high...

Weekly highlight: The previously mentioned large purchases by Institutions coupled with the renewed talk of QE3 and indeed the market moved higher. Comments from last week's post continue to seem pertinent: Additionally, the rather noticeable breakdown in the US long treasury market suggest that higher, not lower asset prices ought to be expected for at least the next little while. Good corporate earnings, good economic numbers and a friendly US Federal Reserve Board have all laid the groundwork for a significant test of the spring stock market highs and in my opinion a substantial move higher over the coming weeks/months. 

Trading Strategy (1 month): As we head towards Labor Day and even into the first week or so beyond, I am leaning towards higher, not lower prices. New upside objectives include a small daily bull ab=cd (target of 99.74) as well as a gap that ought to be filled at 99.53. Lastly, we do have a rather noticeable weekly bullish ab=cd currently working which in itself suggests prices want to eventually move towards the 102.50 area (which happens to correspond with the same level as the massive daily bull ab=cd, 102.54).

Trading Plan for this coming week: As stated above, I shall be looking for this move to continue to the upside but do expect quick violent moves lower to try and flush out as many 'weak hands' as possible. Continue to use 'OTE' setup to identify buying and selling opportunities at key support/resistance levels on the 60m chart outlined above.

Picture everyday my ideal trade....looking for complete washout at or near OTE/HG zones on 1hr/4hr charts. 

b2 aoco (-.24/+.10/+.41)....on fill leave stop on remaining at original level! Risk becomes $130. Reward if target hit = $500.00. If system is 70% accurate. in 10 trades net ret. = 3500 - 1500 = +2000.00

Focus for the week: I feel more comfortable in the trading seat than I have before and I believe that is a direct function of closely examining my feelings behind trading (as outlined in prev. homework from TsT's Dr. M.). This past week's homework was and is to pick one or two process goals and work very hard on both achieving the goal but also in creating some sort of feedback loop to assess and reassess progress. Picturing myself executing my ideal trade every morning and each time I take a 'market state' reading shall be my process goal for the coming weeks. It shall be interesting to see if it cuts down on a lot of the little nonsense trades one gets oneself into out of boredom...

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca
http://crisdaytrading.blogspot.ca/

CLV12 - Update for August 17th, 2012

Roll has begun and we are now in October Crude (CLV12) 

Price analysis for the week of August 17th, 2012:

 

Market Overview: As the end of the summer approaches so too does Labor Day weekend. This event is often coupled with extremely low volumes with violent price action. Since September is often a poor month for asset performance, a good portion of the rally we are witnessing now (and over the coming three weeks) may be given back rather quickly once the professionals come back from their vacations.

Weekly highlight: The previously mentioned large purchases by Institutions did indeed set up the market to move higher. Additionally, the rather noticeable breakdown in the US long treasury market suggest that higher, not lower asset prices ought to be expected for at least the next little while. Good corporate earnings, good economic numbers and a friendly US Federal Reserve Board have all laid the groundwork for a significant test of the spring stock market highs and in my opinion a substantial move higher over the coming weeks/months. 

Trading Strategy (1 month): The previously stated upside objective (daily bull ab=cd) has been hit and exceeded. With this target hit one ought to expect a bit of a correction but given the light volumes and seasonality, that correction ought to still be considered a buying opportunity. New Upside objectives include a small daily bull ab=cd (target of 99.74) as well as two significant gaps that ought to be filled (97.27 & 99.53). Lastly, we do have a rather noticable weekly bullish ab=cd currently working which in iteself suggests prices want to eventually move towards the 102.50 area.

Trading Plan for this coming week: As stated above, I shall be looking for this move to continue to the upside but do expect quick violent moves lower to try and flush out as many 'weak hands' as possible. Continue to use 'OTE' setup to identify buying and selling opportunities at key support/resistance levels on the 60m chart outlined above.

Focus for the week: I am comfortable with 'OTE' trading and I want to focus this week on Trade Process goals. Additionally, a TsT adviors (Dr. Menikar) has given recruits an assignment to really explore feelings around loosing trades. How does it make me feel, what are those feelings, are they justifiable and is acting on those feelings really in my best interest.....very interesting stuff....

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca
http://crisdaytrading.blogspot.ca/

CLU12 - Update for August 10th, 2012

Price analysis for the week of August 10th, 2012:

Market Overview: Crude Oil prices are slowly retracing a good portion of the late spring/ early summer sell-off. One ought to have expected some sort of bounce (where multiple 50% rules were pointing towards the $92 to $93 area). That 'easy money' rally is now behind us and one ought to be a little more conservative (with regard to upside or downside price projections) at least until we are out of the 'dog days' of August. Indeed, we are now quite comfortably into what are known as 'the summer doldrums' where volume thins out as many market participants are on vacation. Within these types of environments price action can be swift and violent yet lack conviction - be careful. 

Weekly highlight: Most notable of late, institutions were back loading up on the long side of the market (this past week's CoT report showed a net swing of 30,000 contracts to the 'buy' side by large institutions). Is the smart money looking for further price appreciation in the short term? Was this past week's 'distributive' price action nothing more than the institutions passing on some of their recent purchases to retail customers? Only time will tell, but as the saying goes - volumes speak volumes...

Trading Strategy (1 month): (same as last week) the rather significant double bottom that was registered on the break of 90.95 shall act as support in the short term. My upside target remains the daily ab=cd bull pattern goal of 95.68. I am concerned this latest move higher has NOT been confirmed by momentum studies. This suggests we do have a bearish momentum divergence building on a daily basis. While not confirmed yet, it does suggest the bull isn't as strong internally as price would suggest. It also implies a push into our target zone (95.68) ought to be considered the end of the run (profit opportunity) and not the beginning of a new bull leg (no new buying until this momentum divergence is resolved). Since this is building on a daily basis it should be interesting to see how this plays out for day trading purposes.
Trading Plan for this coming week: The consolidation I was looking for took almost the entire week to play out with prices pushing to new highs early and failing late. In what technician's refer to as a 'Head & Shoulder's' top, price looks like it wants to probe down into the 91.12 area once again. Additionally, a 50% retracement of the entire move up (90.82) ought to lend support to prices testing the previously mentioned important area (90.95) in the short term. We did trade to 91.71 and put in a 60 minute double bottom through the end of Friday's session by closing above 93.28. This complicates things because it suggests there is a lot of support at the daily, weekly 1 year and weekly 2 year 50% levels and this really isn't an area you should be trying to squeeze nickles and dimes out of. Considering too the bullish tone to the overall market (seasonally an OK time for stocks so PoLR = up) and our yet-to-be-hit daily bull ab=cd target (95.68) and there are plenty of reasons for me to be bullish. Bull / Bear marks to watch outlined on chart above (it is interesting to see I have nothing between $94.74 to $95.68 and $89.63 to $87.58).

Focus for the week: Adding 'OTE' to analysis process has both increased trading opportunities and overall market confidence. Risk/reward models are far better, trade duration models are better and frankly I have been stunned by the amount of money that has been made through 'OTE' signals of late - stunned (and I have been at this game a long time). There have been draw backs to adding to the Analysis process in that my Trade process has suffered and that shall be my focus for the coming week. I have had a couple weeks to get used to OTE's and now have to work on my 'algorithmic' approach to the Trade process. I have a sneaky suspicion that (very much like the HG trade setup) a maximum of $500 risk (or 50 ticks) is just too little a 'risk window' to trade either HG's or OTE's effectively. I will continue to keep data on trade success/failure and how much farther the market went before it did indeed turn.

Analysis process: 

Step 1. Initial Position: Assuming the 60m chart is both trending (as measured by 9/20ema relationship) and has well established targets (typically I use 'harmonic' price patterns like the ab=cd for example) and both volume and momentum are in confirmation. On 15m signal (9/20ema confirmation of trend, price trading at or between 9ema & 20ema with momentum & volume confirmation) move to Trade Process. Ideally I would love to see these signals come in right at 'OTE' entry points.

Trade Process: Upon completion of analysis process begin trade process. 

Step 1. Enter order (on stop) to take a position on 1 (one) contract AOCO -12 [for total risk of $125 on the trade] / +40 [for total reward of $400 on the trade]. AOCO means that once the primary open order is filled there will be an automatic exit order entered on 1 (one contract) at plus 40 ticks ($400). Additionally, there will be a stop loss order entered on 1 (one contracts) at minus 12 ticks ($120). Once the exit order is filled (at plus 40 ticks) the stop/loss order is cancelled. I am scaling back to one contract on the initial trade entry because I have found it is far more efficient to add to the position, once it has become evident the market has indeed found support/resistance and is turning rather than go 'all in' on the initial test of target. Trade process step 1 may take 2-3 attempts. Should stops be hit, it is important to identify 78.6% and 88.6% and repeat. Because of current risk model ($500 maximum risk or 50 ticks per day) my day's activity will end on three consecutive failed attempts. This is highly unlikely but a very realistic probability (10%???) so winning trades must be maintained and maximized....because if this I am reluctant to implement the b/e+.01 strategy at this time. 

Analysis process:

Step 2.

Adding to the trade: (Referring now to the 5 minute, 1 minute and (120)Tick charts). Once a turn has become evident, use momentum, price and volume signals (all time frames must agree) to add to position.

Trade Process:

Step 2. Enter order (on stop) to take a position on 1 (one) contract AOCO (risk should be determined by support &/or resistance and higher or equal with position 1's stop.....no more than maximum risk of 12 ticks or $125)/+.40. Once price, momentum & volume turns are in we should be fully invested in either 'OTE' or 'HG' trade. Long 2 contracts with 2 stop orders working (maximum risk $250) and 2 sell orders working (maximum reward $790). 

Question: At what point do I either let one of the contracts just run (ie. remove AOCO sell at +.40 on one contract) or change the stop orders to 'Trailing stops'. Something I will need to work on through the coming week.

Interestingly, once the orders are placed and filled by Trade Step 2. the work is basically done.....its now just a question of if my analysis is indeed 70-80% correct.

Question you have to ask yourself every morning: 'Are you in the game?' It is OK not answer no; but if you answer yes - then its 110% focus or you are just wasting time....

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca
http://crisdaytrading.blogspot.ca/

CLU12 - Update for August 3rd, 2012

Price analysis for the week of August 3rd, 2012:

Market Overview: Calmer heads seem to be prevailing of late from Europe as the ECB has stated in very strict terms that it will do all in its power to defend the Euro-FX. From North America, surprisingly positive jobs data coupled with little inflation and good corporate earnings have laid the ground work for a very typical 'dead cat bounce' out of the seasonal late spring/early summer lows. It is interesting to see this past week saw the initial signs of the smart money unwinding their rather dramatically bullish stance in Crude. Is this the beginning of them walking away from the crude bull? Only time will tell, but my hunch is we will trade back into the mid to high 90's. then fail into the late fall/early winter as the impending US 'fiscal cliff' (January, 2013) will dominate news headlines and trade at that time.

Trading Strategy (1 month): the rather significant double bottom that was registered on the break of 90.95 shall act as support in the short term. My upside target remains the daily ab=cd bull pattern goal of 95.68 but I do believe we are going to see some rather dramatic swings (both higher and lower) before we hit our destination.

Trading Plan for this coming week: I shall be looking for some sort of consolidation of the rather dramatic rally seen on Friday. A 50% retracement of the move up would bring price back into the 89.33 area. Having said that, a move through Friday's highs would suggest we are going higher in the short term. Regardless, I shall wait for some sort of consolidation in the short term before entering a position. Should that consolidation come in followed by a subsequent breakout (on good momentum and volume) I shall look to enter long. Ideally I would like that signal to come in at or near an 'OTE' entry level.....lets see what happens.

Focus for the week: Continue to work with using the hourly chart for targets/breakouts and the 9 period ema on the 15m chart for entry points. 'Process goals' have gone very well for the past month - continue to follow both analysis process and trade process strictly. This week's primary focus shall be (as mentioned below) the inclusion of 'OTE' trade signals into my analysis process.

Analysis process: Assuming the 60m chart is both trending (as measured by 9/20ema relationship) and has well established targets (typically I use 'harmonic' price patterns like the ab=cd for example) and both volume and momentum are in confirmation. On 15m signal (9/20ema confirmation of trend, price trading at or between 9ema & 20ema) move to Trade Process. Ideally I would love to see these signals come in right at an 'OTE' entry points.

Trade Process: Upon completion of analysis process begin trade process. Enter order (on stop) to take a position on 2 (two) contracts AOCO -12 [for total risk of $250 on the trade] / +10 & +40 [for total reward of $490 on the trade]. AOCO means that once the primary open order is filled there will be an automatic exit order entered on 1 (one contract) at plus 10 ticks ($100) and one (1) at plus 40 ticks ($400). Additionally, there will be a stop loss order entered on 2 (two contracts) at minus 6 ticks ($120). Once the first exit order is filled (at plus 10 ticks) the stop/loss on remaining one (1) contract is moved to b/e+1 (or +1 tick from where the original entry.  As previously stated, I am still debating the merits of the 'stop move to b/e+.01' trading theory.

Comment: I am very pleased at finding a new 'edge' trading methodology this past week called the Optimal Trade Entry model ('OTE'). Youtube Web link. I shall be trying to incorporate OTE signals into my trading plan as they correspond very nicely with 60m ab=cd target analysis and double bottom/top theory.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca
http://crisdaytrading.blogspot.ca/