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High degree of confluence in CL
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High degree of confluence in CL

  #1 (permalink)
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High degree of confluence in CL

There is an interesting case for a possible swing long position in Crude Oil that may be setting up. I realize CL is in a major downtrend right now, but the confluence of fib ratios on both the daily and the 60 minute charts is at least something to take note of.


First, on the Daily chart, we have a possible completion of an ABC correction to the previous, and still intact, uptrend. The tight confluence of fib ratios intersecting with the major trendline means this possible support area has a lot going for it.

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Then, on the 60 minute chart, we have a nearly picture perfect 5 wave move completion target with multiple APPs and an external retrace creating a very tight zone. We also have a possible local double bottom.

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IF this high confluence area holds, it presents very interesting risk to reward possibilities.

If you are not familiar with trading crude, a word of warning; it is notorius for making a final push to grab every last stop just below the previous low pivot (in this case the local double bottom), and just as likely can spike bottom and never look back.

This is not a recommendation, just an observation. I am personally watching to possibly take the trade after some sort of reversal confirmation. I may also go in low with a tight stop if I see it blow the stops at the DB, high volume stop, then take out the previous bar high.

Good luck, stay safe!

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GaryD View Post
There is an interesting case for a possible swing long position in Crude Oil that may be setting up. I realize CL is in a major downtrend right now, but the confluence of fib ratios on both the daily and the 60 minute charts is at least something to take note of.

Then, on the 60 minute chart, we have a nearly picture perfect 5 wave move completion target with multiple APPs and an external retrace creating a very tight zone. We also have a possible local double bottom.

IF this high confluence area holds, it presents very interesting risk to reward possibilities.

If you are not familiar with trading crude, a word of warning; it is notorius for making a final push to grab every last stop just below the previous low pivot (in this case the local double bottom), and just as likely can spike bottom and never look back.

This is not a recommendation, just an observation. I am personally watching to possibly take the trade after some sort of reversal confirmation. I may also go in low with a tight stop if I see it blow the stops at the DB, high volume stop, then take out the previous bar high.

Good luck, stay safe!

So far it was a ping pong game between the confluence zones and both the retracments and the counter trend entries were tradeable. However, the retracements had a better reward-to-risk ratio. I am always a bit reluctant to take a counter trade, just because there is a confluence zone.

The specific setup may be a case for a long position, as

- CL 08-11 made a higher high and did not test the trend channel line
- there was a significant divergence on volume

If the long fails, and CL goes below the confluence area, the target would be around 85.50.

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I'm interested to see how some of you guys calculate your risk reward.

Generally speaking, I think a lot of guys understand the notion or tradeoff between waiting for confirmation (safer, but with less potential profit) and trying to pinpoint pivots/reversals exactly (riskier, but with higher potential profits).

It would seem to me that the latter would be skewed. If for instance, you see the market "setting up" for a reversal, how exactly do you calculate the potential upside as without a new trend channel, it's virtually impossible to speculate just how much upside there is.....

Noteworthy is that every new trend starts with "appeared" to be a cyclical turn and simply continued into a new trend. (unless of course there's major and extended stalling with resistance or support points).

With oil, I find that the longer time frame charts are more predictable in terms of technicals, but the drawback is the fundamental impacts (i.e. you could be spot on with your technical entry in reference to volume and price action and a catastrophe, storm, announcement, economic report, etc comes out and totally kicks you in the crotch).

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Fat Tails View Post
So far it was a ping pong game between the confluence zones and both the retracments and the counter trend entries were tradeable. However, the retracements had a better reward-to-risk ratio. I am always a bit reluctant to take a counter trade, just because there is a confluence zone.

The specific setup may be a case for a long position, as

- CL 08-11 made a higher high and did not test the trend channel line
- there was a significant divergence on volume


I have not watched volume for divergence, but I do watch Momentum and MACD, and both are suggesting divergence in this particular instance. The real proof will be in the reversal.

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I'm interested to see how some of you guys calculate your risk reward.

Generally speaking, I think a lot of guys understand the notion or tradeoff between waiting for confirmation (safer, but with less potential profit) and trying to pinpoint pivots/reversals exactly (riskier, but with higher potential profits).

It would seem to me that the latter would be skewed. If for instance, you see the market "setting up" for a reversal, how exactly do you calculate the potential upside as without a new trend channel, it's virtually impossible to speculate just how much upside there is.....

Noteworthy is that every new trend starts with "appeared" to be a cyclical turn and simply continued into a new trend. (unless of course there's major and extended stalling with resistance or support points).

For me, a "setup" is just something to start being aware of. Entering a trade then requires a "trigger". Something as minor as a confirmed reversal bar might be one trader's preference, a breakout above 96 might be another, and a confirmed breakout above 104.50 still another, each would add a higher degree of confirmation, depending on your hold timeframe. I very rarely hold positions overnight, but I still always have a longer term view that I just revisit each day. But on setups that offer an extreme reward to risk, my trigger may be for a scalp trade, then hold a runner, than at the end of the day (if I am profitable) decide if to trail it.

I would probably take all three confirmations, if they gave me the opportunity. For me, Crude's swings are too lenghty to position trade it without a high degree of confluence, and without some other factors. But I always watch for these setups as when they do hit they offer an incredible reward to risk.

To share my personal take on risk/reward;

I track CL's swings over the past 90 days, and break them into percentages of how often they occur. For example, as of last week, the "average" swing (calculated using a 9 Renko as it is easier for me to filter out noise when reviewing past moves, and I like a swing size that coincides with my time frame and risk I am willing to take) is $593.20. However, even though that is the current "average", it only occurs 39% of the time. I shoot for a target 1 of at least a 50% occurence, which currently is roughly $500.00 (50.61%). I do not try to pick the tops and bottoms and enter only after a reversal, so my profit target is almost always less than my swing target, as the swing has already started before I get in.

I'd obviously prefer $1,000.00 in terms of my target swing, but the occurence of that size swing is currently only at 9.15% of the time. If I took every swing (which I don't), and If I thought I could enter on the low tick (which I have proven too many time I can't), I would have to have a $100.00 stop to break even (after costs). While that is not how I trade, I try to always be aware of the probabilities.

Of course there are other factors that improve the actual odds of "this time" being the one that makes it to $1,000.00 or beyond, and that is where I try to use confluence zones to help me. What I have found is that confluence zones and elliot sturtcure just gives you something to believe in, which helps keep your mind in the right direction to stay in a move. It may not improve your chances of being "right", but it can still improve your chances of success.

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If you are not familiar with trading crude, a word of warning; it is notorius for making a final push to grab every last stop just below the previous low pivot (in this case the local double bottom), and just as likely can spike bottom and never look back.

This is not a recommendation, just an observation. I am personally watching to possibly take the trade after some sort of reversal confirmation. I may also go in low with a tight stop if I see it blow the stops at the DB, high volume stop, then take out the previous bar high.


Crude followed the script almost flawlessly;

Step 1) Blows stops at the local double bottom

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Step 2) High volume stop, then took out previous bar's high

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Step 3) Takes out previous bar's high (a 1 minute is too close for me, other than for volume analysis on stop losses only)

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  #9 (permalink)
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GaryD View Post
Crude followed the script almost flawlessly;

Step 1) Blows stops at the local double bottom

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



Step 2) High volume stop, then took out previous bar's high

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



Step 3) Takes out previous bar's high (a 1 minute is too close for me, other than for volume analysis on stop losses only)

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Hey GaryD,

I love this trade, which I refer to as failed breakdown/out. I use range charts, but the same idea, look for a move below the last pivot, but then quickly closes back inside above the last pivot. Same in reverse for a short trade. I don't use volume either, but see where your analysis makes sense. It seems we have something in common besides our name, broker, data feed, platform, and preferred instrument.

Gary

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Gary View Post
Hey GaryD,

I love this trade, which I refer to as failed breakdown/out. I use range charts, but the same idea, look for a move below the last pivot, but then quickly closes back inside above the last pivot. Same in reverse for a short trade. I don't use volume either, but see where your analysis makes sense. It seems we have something in common besides our name, broker, data feed, platform, and preferred instrument.

Gary

Gary, I've actually looked you up once before. "CL Assassin" caught my attention. I can't say that I have that level of confidence in CL yet. I am more the "CL occasionally kicks my butt" trader. But that is a great improvement from my previous "CL please don't hurt me", or before that "CL, WTF?" trader!

Great market, but requires a lot of determination to staty with it.

One thing that gave me more desire to take the long today is the multitude of confirming factors for short-term support in this area, the charts I posted at the start of this thread. I have not had much luck with any specific fib ratio or even confluence of ratios in a single time frame as a stand alone tool, but when you get a tight range in multiple time frames, particularly daily and intraday combined, I have found those to be very powerful when you throw in the high volume stop discussed.

The toughest part for me to learn to accept was being willing to attack what seems like a very strong countertrend move. But today's action I have found to nail CL's behavior to a T.

It seems you and I are not the only ones familiar with this setup, as when it works it explodes in our favor. Did you take this today?

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