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Research: trading pullbacks in CL

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Research: trading pullbacks in CL

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  #41 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
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Also, tick charts in general are very helpful for seeing a better picture after crude inventories, or after some major market shock, as well as making sense of the Globex session. If you use 5 minute candles to make sense of Globex, you won't be able to most of the time!

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  #42 (permalink)
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You often say "we".

Who, exactly, are you referring to?


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  #43 (permalink)
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Georgii View Post
Interesting. If you could illustrate it with a chart it would help me get a better picture of how you use it...

Sorry, had to run the other night. Here's an example of price moving through 9 ma, breaking resistance with a possible 10 penny move. Resistance shared by 3 touches at the 84 level made for close watching. I know, lots of lines, but this is how I watch price action. The above lines are my hopeful destinations. Not looking too cheery at the moment. gotta get through 03. Sometimes insert Darvas in case I miss a level. Australia and Japan just opened...crazy ride!!!

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  #44 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
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Big Mike View Post

You often say "we".

Who, exactly, are you referring to?


Hi Mike!

I'm using we to address those readers who are trying to follow along with my way of thinking, should they so choose. I could of course say 'I', but I don't like saying "I' all the time and it just feels nicer to involve everyone in the conversation. I even write that way when I write for myself, it makes me feel I'm addressing someone as opposed to talking to myself.

Thanks Tim! So you watch for the price to cross through and sort of 'break out' from the 9 pd EMA? You're playing momentum trades?

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  #45 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

Another opportunity today...

9/10/14, Wednesday: INVENTORIES DAY

Note: You may at times have trouble seeing the whole image even if you expand it. If you click on the image, in the control strip below there's an option to show the image in its actual size (it's the box with an arrow pointing out of its right upper corner). Click on that and you'll get to see the actual image in its native resolution.

Beginning with the 5 minute chart on the left...

1. Yesterday's session can be characterized as weak and it ended lower, and we are still in a neutral to down trend on the higher time frame.
2. The market gapped down, started to pull back, but bears took over. They aren't very strong here, but they did move.
3. The pullback is on the deep side but orderly and weak.
4. The entry bar here is pretty small. It is pointing away from where we want it to, so it is on the neutral side, but it is compressing which is good.

We can see the 512 tk chart on the right helped us with a bigger picture.

i. We see that the market ranged overnight, but it never got higher. This is a sign the bears are moderately in control, though not firmly.
ii. The market pressed lower at the pit open, and it broke out of a Globex (purple area) support zone.
iii. This can be clearly seen as a support turned resistance idea. The 512 tick candle is a good reversal candle which coincides with the support zone.

We also have some observations of what happened later during the inventories report...

iv. Upon the release of the numbers (yellow zone) the market didn't move up at all, that seems to relay fairly strong bearish consensus.

A. (both charts) We can see that we never got a chance for a real pullback here. This is a strong trend, the kind Al Brooks defines as breakouts. Buying into these kinds of formations is not easy because of the difficulty in setting a good stop. Brooks advocates scaling in, which is not possible if you're trading all-in, all-out.

If we look at v on the 512 tick chart, we see we could have possibly shorted the reversal like bar which aligns with a cluster of price action to its left, for a reversal trade. A bit aggressive though.

B. We see the market tagged a long term support area, and it bounced back. Lance Beggs posits that at such point we typically get a complex pullback, but we don't enter new trades after 11:30 according to our rules.

A little note: I did take the setup on the 5 minute chart. However, stupidly enough, I put in a join bid order instead of a join offer, and didn't even realize that until I got stopped out of the trade as it pulled back.

This is what happens when you're underslept and underfocused. I lost 5 points because of carelessness, and I didn't even realize my mistake until I exited the trade. Ironically my decision to manage this trade aggressively would have been unfortunate if I had not made the mistake, but it turned out to be in my favor - so I guess a little luck ended up halving my loss.

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  #46 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

Let's continue with February, 2/3/14, Monday

Clearly one month of samples is only a mere starting point if that. Ideally we'd want to target about 200-300 patterns, but the point of this journal exercise is to set the process on its legs and develop a framework for analyzing this sort of setup with all of its iterations, to start asking the right questions and possibly draw some helpful conclusions that can be used to mold a proper rule set.

1. Here we once again run into the problem of two different overlapping trends. Yesterday's session did close down, but the general tone of the day could be described as range bound. We see that overnight in the Globex session we did get a lot of rangebound behavior - sharp sell off (i) followed by a sharp bullish ascent (ii). This created a confusing picture.
2. We do have a down trend from the open, which parallels yesterday's down trend. It is medium strength.
3. The pullback happens right by yesterday's pit close. It is fairly medium which is good. If we look at the 512 tick chart to the right of iii, we see that there's a cluster of overhead resistance.
4. An almost perfect entry bar, would have been better if it had a low close. The bar triggers almost immediately, but then shoots right up and stops us out.

We do get a complex entry technically, but it is not valid as this is during pretty significant news (ISM manufacturing).

No luck this day. We see the market continues a sell off. The 512 tick chart offers a simple pullback at v.

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  #47 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

2/4/14, Tuesday

1. We had a rather rangebound end to yesterday, then a rather persistent uptrend began overnight resulting in a gap up.
2. The second leg weakened a bit by yesterday's resistance (not shown, off chart) but ended moderately strong.
3. This pullback starts strong, then weakens before going down strong again.
4. The first entry candle highlighted offers great risk reward - it's a compressed candle and it has a prior swing high defending it from the left. But alas, the next bar tells us that right after we got triggered in we get stopped out (an 'outside down' bar in Al Brooks speak).
4a. This reentry bar is possible right after the 10:00 news release (Factory orders).

The trade begins moving properly, then we see a strong flush down. Aggressive stop management (for example, swinging the stop right below each candle) would have had us out, a more lenient initial stop would have let the trade complete.

A. This may look like a very deep pullback, but notice that the market didn't really break any significant new highs (only by a little). I'd sooner classify this as a range trade of sorts. As you can see, the follow through was not exactly impressive.

If we look at the 512 tick chart on the right we notice a solid complex pullback at i.

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  #48 (permalink)
Birmingham, AL
Posts: 1,065 since Apr 2012

My goodness, just found your thread. You're like the spitting image of me trading from a few years ago! Except you seem more consistent and more organized. ha. Very cool.

Keep up the good work.

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  #49 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

2/5/14, Wednesday: INVENTORIES DAY

Here is a frustrating situation, but maybe the Globex chart could have helped us avoid a problem in this situation.

1. Yesterday was a ranging day, which closed higher than the previous day. The market gaps up, but immediately begins to sell.
2. The sell off is pretty strong, giving us some courage in the trend. However a glance at the Globex chart reveals that we're in fact just showing the down leg of a trading range that was defined overnight (purple area).
3. The market pulls back for two bars, one bar is strong, the other a bit weaker but still bullish. If we look at the Globex chart it breaks just above the support of the wide and rather defined Globex range.
4. Entering on a stop below this bullish candle is on the thick side but still offers a 1:1 risk reward. In the wake of the strong initial trend it appears justifiable. However, soon enough we're stopped right out.
4a. This is a very nice looking entry bar, only wish it had a red close. We do get triggered in, and stabbed right out again. Twice in a row.
4b. Reentering a third time is scary, especially with inventories coming up, but this entry did offer a potential trade that may not have completed entirely but could have offered a little profit.

We see from the perspective of the Globex session that this was simply a fakeout below what was a large trading range, and the counter-trend fakeout traders walked away with a decent scalp.

The 512 tk chart shows a pretty bearish inventory trend, which offers simple pullbacks on the 512 tick chart.

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  #50 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

indextrader7 View Post
My goodness, just found your thread. You're like the spitting image of me trading from a few years ago! Except you seem more consistent and more organized. ha. Very cool.

Keep up the good work.

Thank you indextrader7! If there are any helpful hints or observations you can make in any way, I'd be happy to hear them!

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October 19, 2014

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