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Research: trading pullbacks in CL
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Research: trading pullbacks in CL

  #11 (permalink)
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1/6/14, Monday

Here's one of those days that offered us nothing...

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Somebody might have seen that nice reversal bar at A and thought we had a bullish flag/retracement. Sorry, there's just no trend here to speak of. That in my book is an inside range reversal, which I think is only tradable if you like scaling in lower, and it's not the kind of trades we're looking at anyway...

1/7/14, Tuesday

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Another day of signals I would heavily question.

A is inside of a trading range. B is what I'd consider a breakout pullback, but a weak one. We have overall bearish trend here that is continuing from the previous day and days, and this bullish breakout is pretty weak while the pullback is pretty strong (see that strong red bar?). I would not classify this as a proper pullback trade, more of a weak bull channel that may be forming but is likely to fail (Al Brooks talks about trading channels if you're interested).


Last edited by Georgii; September 7th, 2014 at 11:18 PM.
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  #12 (permalink)
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Georgii View Post
Hi Tim! Right now I have a 21 pd EMA (green) and 63 pd EMA (red) on them just to see trend. I see the logic behind using a shorter EMA, but I'm cautious about relying on EMAs for entry signals so I purposely just keep longer ones so I can see them as trend strength indicators as opposed to S/R.

I have found using a longer ma delays my response time. If a bar penetrates and is followed by another, time to bail. You may be surprised at how many bars can stay above or below the 9. Take a peek back. That is all I have on my bar chart. Volume on the bottom which I sometimes take a look at. I am always looking left to see where the next s/r is. Just for the heck of it, it may retest 86 from last winter.

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  #13 (permalink)
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missionatsea View Post
I have found using a longer ma delays my response time. If a bar penetrates and is followed by another, time to bail. You may be surprised at how many bars can stay above or below the 9.

Tim, do you use it for entry (e.g. as support) or for trade management?

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  #14 (permalink)
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1/8/14, Wednesday: INVENTORIES DAY

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Inventories day have two extremes: before the data is released, and after. Before the market tends to be fairly quiet and erratic at times, after the market volatility goes bananas and it takes a while for things to settle sometimes.

We have two possibilities so let's look at them:

1. Overall trend is still quite down. The Globex session (i, 512 tick chart on right) is pretty rangebound however.
2. This is tricky since on the five minute chart we don't display Globex. Here the market opens right where it closed and continued yesterday's bearish trend naturally as if the market never closed. We are in fact seeing two separate down trends. The opening two bars of today's session (green) don't have strong conviction, but they are down for sure.
3. The pullback here is weak (tails on bars), so that looks promising.
4. The entry bar here isn't well defined. As a matter of fact I hate entry bars like this, it is fairly neutral and the long tail at its bottom isn't very interesting to short into. I'd rather be shorting below a bearish close without a tail, but this is what the market provides. The 512 tk provided a better entry (ii, sorry about the smushed graphics, Paint does a crappy job rescaling images).

As we can see, this one really jumped down hard and fast. Love that.

Now we have a second entry to consider, which happened after inventories (yellow section iii on the 512 tk).

2a. No doubt, bearish for sure, and very strong trend in one bar. But this is common with inventories, volatility expansion, etc, so that alone isn't enough. We do have overall bearish context recently, and the thing is inventories didn't surge up at all, just down. That increases the bearish chances a bit more.
3a. A sharp pullback. No surprise here, volatility increases, back and forth increases. This is a deep pullback, with just over 50% retraced.
4a. A tiny little bear bar to short into. It works here, but with such a sharp bullish pullback and volatile situation stop placement becomes tricky. Either get smacked around a lot or get that lovely move all the way up into the sky. Waiting for a complex pullback is inviting, but it didn't happen here.

If we look at the 512 tk we can get some more ideas here...

iv. We could have scalped a quick pullback here which was invisible on the 5 minute chart. A bit risky with the volatility expansion but it worked.
v. Another signal, but it failed. What you gained on iv you lost here.
vi. Our entry on the 512 tk consisted of two consecutive bear bars here. It worked as you can see, no trouble with clear stop placement. But again, let's realize that when we go with the 512 tk, we can have problems like v.

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All depends on where the next s/r is located. I always use the 9 for my current trend. I get burned time and again trying to counter. Then I look to the left and see if there is space for a minimum 10 penny move. It's a feeling that begins to develop when I see the candle move through the 9, see that space and know there could be more than there is. I like candles for their visual affect and the tails they leave or not when they near the s/r levels.

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  #16 (permalink)
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missionatsea View Post
All depends on where the next s/r is located. I always use the 9 for my current trend. I get burned time and again trying to counter.

Interesting. If you could illustrate it with a chart it would help me get a better picture of how you use it...

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  #17 (permalink)
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1/9/14, Thursday

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1. The trend is still down, down, down!
2. We are starting with bearish action, but let's pay some attention to Globex (i). It's interesting to note that overnight the market went up, tested support turned resistance from yesterday (line), and then went in a rangebound motion just before the pit open (ii) before resuming the move down (iii). We do have a target for the bears there, it's the close of yesterday's pit session (red zone).
3. This is a shallow pullback, the counter trend bar is showing some strength but there's really just one bar after a reversal bar and it happens at 10:00, which may be during news. A bit scary here because you're afraid of a reversal at yesterday's close (esp. after news) but the market soon went weak again. If we look at the 512 tk, we see a nicer looking bar (iv) to short below, but still a tight situation here.
4. Not a fun bar to short over, too tight of a pullback and there is potential support below (yesterday's close), but it seems the overall bearish trend makes it work.

The market does go down but then it jerks up quickly if you look at the 512 tk, v. That's enough to possibly shake us out depending on how we trailed our stop.

If we look at A on the five minute chart on the left, we see what looked like a setup, but it was very tight and it would have required us to enter at 11:30, violating our rules.

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  #18 (permalink)
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Wow your strategy is strangely very similar to mine, I mean I trade the exact same strategy and most your parameters are exactly the same!
Nice to know I am not alone in my beliefs in trading CL.

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  #19 (permalink)
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Skinchin, glad to know

1/10/14, Friday

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Starting as always with the 5 minute chart...

1. We gapped up overnight, and then selling pressure reemerged. We are still technically in a down trend on the higher timeframes.
2. The market sold off pretty heavily at the high of the day (possibly triggered by news) and the selling continued past the low of the day.
3. We had a respectable pullback here, the problem here is you don't know whether to judge the trend by the high to low, or the last bearish breakout. If its the last bearish breakout, it's a deep pullback, if you take the move from the top its on the tight side.
4. The last bullish candle is not my favorite type, I would much rather have the close of the bar in the middle or obviously the bottom, but that is what the market provided. Still, it is just about the right size, not thick at all and good for a 1:1 risk reward. What is interesting to note here is that this reversal point coincides with support which may now become resistance. That makes this trade more favorable because of the confluence: higher time frame bearishness + strong bearish sell off + support turned resistance level for breakout.

The follow through was pretty decent, with a little nested pullback. It did the job however.

Now if we look at the 512 tk on the right with Globex we get a cleaner picture.

i. We see that after yesterday's pit session close something happened and crude began to rally all the way into the night.
ii. It faced a respectable sell off after a climax, a perfect example of mean reversion in a move that fought the larger term trend.
iii. A tight simple pullback for the 512 tk scalpers. There is no really significant level here, though you could sorta pick it out from the Globex session. Afterward we see the market did a tease lower and then a bull rally again.
iv. Market reverses, possibly due to news. A strong bearish trend is visible here.
v. A strong break of intraday support.
vi. The last countertrend green pullback bar is pretty strong, and its soon followed by a bearish bar. Possibly on the aggressive side to enter right afterward, and a tight stop (a tick above the swing high) would have gotten us ticked out here. Taking an Al Brooks style 'low 2' entry (trading the second break below a counter-trend candle), would have been a safer bet here. Quite a bit of congestion to endure before follow through, aggressive stop trailing would have left us with a scratch here.

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1/13/14, Monday

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1. Here we have a gap down, but it is immediately followed by significant bullish pressure. Keep in mind however that a quick glance at the EMAs will tell you we're still in a down trend on the higher time frames.
2. The bullish leg bumps into a clearly visible swing low from Friday's afternoon session. It is weakened and it continues higher.
3. The pullback here is pretty strong, the market seems to lose steam.
4. Here is where we run into a problem defining the entry candle. On the 5 minute, the doji candle following the strong bearish candle is neutral, and as such it could serve as an entry trigger, but it isn't the lowest extreme so that means that we'd have to swing our stop behind the big bearish candle and that would give us a thick entry. We could have tried it on the 512 tk (iii), but this may have been too aggressive of an entry.

The next chance we get is a bearish candle that happens right during the 10:00 news stripe (the red stripe). If we look at the 512 tk chart on the right, we see that we would have had a respectable entry bar at the news period (iv) and the lack of multiple bars on the tick chart suggests there probably was no significant release at the time, thereby making it a legal entry. It was by definition the lowest extreme in this pullback. However, the high close it makes into the middle of what is already looking like a clustery trading range is discouraging.

If we didn't get this one, or got stabbed out of it, we had a chance at a complex pullback at...

4a. This doji was a potential complex pullback trigger but it quickly fails. A small bull body on it would have been more encouraging. We see on the 512 tick a low risk entry bar at v, but it doesn't have enough momentum and may be too aggressive overall. Besides, if we look at the last swing low prior to v, we see we could have also gotten faked out here with a 'spring' trigger. It may be a better idea to leave it alone at this point.
4b. This is already a three wave complex pullback, and we're running the risk of simply being stuck in a bearish channel which conforms to higher timeframe expectations. Still, there is a possible entry here for a bit of profit, vi on the 512 tk provides a better defined way in.

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