Trade of the Week – Crude Oil

Trade of the Week – Crude Oil
TECHNICAL TRADING AT ITS PURIST – OPPORTUNITIES CONTINUE!

Trade of the Week – Crude Oil

From a technical perspective, there is nothing more gratifying then watching the market play out repetitive technical analysis formations. To many people who are first exposed to traditional technical analysis many questions arise to its validity.

How does drawing lines on a graph mean that we can anticipate future movements in the markets?

Well, Technical trading is based on a few premises, namely;

  • Market Action Discounts Everything
  • Prices Move in Trends
  • History Repeats itself
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Let’s look at each one of the above premises mentioned.

1. Market Action Discounts Everything

This means that the markets will trade ‘honest’ to their value meaning that there may very well be a ‘reason’ to why a specific security goes up/down, but it is actual people who fluctuate move it.
A technical trader does not ask the why of a move but focuses purely on the move itself.

2. Prices Moves in Trends

This means that that there are ‘waves’ in which money is either distributed in or out of the markets. It doesn’t happen in an instant but, in waves, or for our purposes, trends.

3. History Repeats Itself

Nothing can be truer in the markets. There have been BOOMS & BUSTS since the markets were invented.

Unless, humanity acquires new character traits you can be rest assured that the 3 tenants of human nature will always drive the markets, namely, GREED, FEAR, and COMPLACENCY.

Getting back to our ‘Trade of the Week’ – If you have been watching CRUDE OIL this week, there was a huge opportunity to the downside. CRUDE OIL has been looking weaker ever since it topped $62.45 back in FEB 2018. After the nice uptrend, we sold off sharply to about $60.10 and kept bouncing. On every bounce we made shorter highs and created what is better known as a DOWNTREND. We then applied the rules of a trend line which states that we connect 2 consecutive lower highs that then extend into the future.

At which point this past Wednesday we looked like we were going to breakout to the upside.
In this move alone a trader could have produces $2.50 (250 pips) on this trade in one day!!! That is HUGE move!!!

Based on a trade size of $5 a pip this would have generated a profit of $ 1,250

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