A simple price action approach

[bigsnack]

TONS of trendline breakage on the CL today, if that's your thing of course

With a R:R ratio of almost 3:1, one would hope to be able pull at least SOMETHING out of oil most days of the week.

 

[NoDoji]

Quote from dv4632:

I've been managing the trades on a 5-min. Shown here.

On this mornings test of the upper limit, my idea was to short the first sign of rejection, first red down bar on the 5-min (orange arrow). My other idea was to wait for a 5-min bar close below the 20ema. Either of those could have resulted in a profitable short trade.

Your main reference levels should remain in the 5-min time frame since that is your trading TF.

There’s no real clarity until the range breakout at 11:00am on your chart. Until then you could just as easily be buying the near the bottom of the range (near the 9:30 low) as you could be selling the top (near the 9:40 high). It’s a coin toss without a breakout to offer clarity.

Once the breakout occurs, though, you can now draw a lower TL across the 10:15 and 11:05 lows and a parallel channel across the 10:25 high (which you sort of have on your chart) and be prepared to short a pullback to the upper channel line. If price doesn’t pull back to the upper channel line, the 20 EMA is usually a solid resistance level to short off of.

In this case, price did pull back to the upper line and offered two good short entry invitations (either an anticipatory limit order at the upper line, or a break of the 20 EMA following the channel line rejection). You can target a move to the LTL, or hold for more and add to the winner as long as the trend remains intact (normally indicated by a failure to break and close above the 20 EMA).

Quote from dv4632:

Then price came back up to test the channel limit again, this time slightly exceeding it. I didn't go long, since it was counter-trend and also right up against resistance from the morning highs.

You missed a lot in between. Price remained beneath the falling 20 EMA, then broke the LTL (more on that below). When price pulls back to the 20 EMA, you’d expect rejection and continuation of the down trend. The rejection at the 20 EMA is fleeting and buyers step right in. After a strong trending move down, this sets up a golden long entry. First, wait for a test of the upper channel line. If price is rejected there and manages to close at or above the 20 EMA, look to go long for a channel break. The upper channel line should become support. At the least, the 20 EMA should hold. If not, look short again.

Quote from dv4632:

But when price closed back inside the channel, I thought short (2nd orange arrow). This was stopped out when price broke back above the channel.

Next price broke back below the channel and closed below the 20ema (3rd orange arrow), so short again. As of now that "pretend trade" is good and a couple of pts in profit.

That channel you’re referring to isn’t in your time frame. Focus on the 5-min levels. Once price barely breaks opening range resistance (failed breakout), I’d take profit on my long, then look to re-enter long on a pullback to the now-rising 20 EMA, but with a tight stop or upon confirmation, because the fbo is small red flag now. When price attempts to make a higher high and fails to even test the fbo level, the red flag is bigger and that’s when I’d exit the second long attempt and consider shorting or waiting for more clarity (flat EMA’s can be dangerous chop zones).

Quote from dv4632:

I also noted a 5-min channel in yellow. Price broke below it and then broke back into it (blue arrow). Is this another case where you buy and hold for a test of the upper limit? Or pass, since it would be going long in a down channel?

Just wondering, would anyone have considered going long, and playing for a breakout of that 60-min down channel? It kept crossing my mind this afternoon. Or would that be considered too counter-trend? (I know, there is no right or wrong, it depends on the trader and his/her plan, but just wondering if that's too advanced a tactic for someone learning this method). Meaning, should I only stick to shorting in down channels and buying in up channels?

Again, stay focused on your 5-min TF and use the 60-min to gauge how much “airspace” you might have to let a winner run.

When price breaks below the LTL and comes back into the channel, especially at the end of a strong trending move, it’s a worthy counter-trend opportunity, IMHO. I often trade this setup for a ride back to the 20 EMA. Then if the EMA doesn't spark selling, be ready to help take any remaining shorts to the cleaners as described above. As Al Brooks would say, the bears are now trapped

 

[1a2b3cppp]

Quote from bigsnack:

TONS of trendline breakage on the CL today, if that's your thing of course

With a R:R ratio of almost 3:1, one would hope to be able pull at least SOMETHING out of oil most days of the week.

http://i262.photobucket.com/albums/ii90/bigsnack/CL07-1189Tick6_13_2011_CL_AM.png[IMG]

[IMG]http://i262.photobucket.com/albums/ii90/bigsnack/CL07-1189Tick6_13_2011_CL_AM2.png[IMG]

[IMG]http://i262.photobucket.com/albums/ii90/bigsnack/CL07-1189Tick6_13_2011_PM.jpg[IMG]

[IMG]http://i262.photobucket.com/albums/ii90/bigsnack/CL07-1189Tick6_13_2011_PM2.jpg[IMG] [/B][/QUOTE]

Did you use any of those in realtime?

Not trolling. Asking seriously.

 

[nakachalet]

Quote from bigsnack:

TONS of trendline breakage on the CL today, if that's your thing of course

With a R:R ratio of almost 3:1, one would hope to be able pull at least SOMETHING out of oil most days of the week.

would you mind show us some of the trades that you have taken today, by using your trendlines, pls? thx

or are you just having a grand time exercising your trendline ability..... lol?

it sure is alot of fun drawing trendlines at the end of the session, too.

 

[bigsnack]

Quote from nakachalet:

would you mind show us some of the trades that you have taken today, by using your trendlines, pls? thx

or are you just having a grand time exercising your trendline ability..... lol?

it sure is alot of fun drawing trendlines at the end of the session, too.

I took EVERY ONE of these trades and exited at the EXACT perfect spot...... I am a CL Wizard....

Seriously though the point of my post wasn't to show how amazing I can draw trendlines after the fact, the point was to show the amount of opportunities one may have if that is the strategy they choose to trade. There were about 3 solid trades on the ES today, and about 15 or more on the CL. I'm not coming at the thread pretending to be a know-it-all so I would appreciate if you could ease off on the sarcasm. I'm trying to help here!

I can show you an execution chart when I get back home. I usually only trade in the mornings, and I will SIM the afternoons if and only if I find time away from my day job. I have a minimum target for the day and usually lose interest after I hit it. I have posted a number of execution charts in the CL Redux thread if you are interested in checking those out in the meantime.

EDIT: As an additional piece of information for how I would actually attempt to enter any of these trades, I would wait for a bar to close above the trendline that I have drawn, and then I would put a buy / sell stop one tick above / below the bar that broke the TL. This will often allow me to confirm that the TL is actually broken, and it keeps me out of some (not all) fakeouts as well.

 

[bigsnack]

3 trades, and then daily target hit so I stopped.

1. Textbook for me, with us breaking a TL and breaking the price where the last volume spike came in. I tried scaling in on this one and it worked so-so. I'm including the scale-ins as part of this one trade.
2. Trade 2 was a loser as I sold a low tick before a new move up.
3. I missed the first part of the meltdown, but the second I got any hint of a bullish TL failure I was in. I took the trade off when the current small time frame bearish TL broke and that was it for me.

 

[Zr1Trader]

update 2 YM, stop now moved a couple ticks better than BE.


Price still respecting original downtrend line.

 

[bigsnack]

Quote from jhiro:

That's why you try to highlight the floor traders method with MA's.. you aren't left guessing after the bar prints

So you feel that certain MA's can help "draw" trendlines for you? If so, do you have recommendations for people? Are you using crossovers, or an "if price is above I'm bullish, and price is below I'm bearish"?

 

[Zr1Trader]

Quote from Zr1Trader:

update 2 YM, stop now moved a couple ticks better than BE.


Price still respecting original downtrend line.

Woah, that was a pretty fast move up... out for a few ticks profit nonetheless.

I'll try again tomorrow.

 

[nakachalet]

Quote from bigsnack:

I took EVERY ONE of these trades and exited at the EXACT perfect spot...... I am a CL Wizard....

Seriously though the point of my post wasn't to show how amazing I can draw trendlines after the fact, the point was to show the amount of opportunities one may have if that is the strategy they choose to trade. There were about 3 solid trades on the ES today, and about 15 or more on the CL. I'm not coming at the thread pretending to be a know-it-all so I would appreciate if you could ease off on the sarcasm. I'm trying to help here!

I can show you an execution chart when I get back home. I usually only trade in the mornings, and I will SIM the afternoons if and only if I find time away from my day job. I have a minimum target for the day and usually lose interest after I hit it. I have posted a number of execution charts in the CL Redux thread if you are interested in checking those out in the meantime.

EDIT: As an additional piece of information for how I would actually attempt to enter any of these trades, I would wait for a bar to close above the trendline that I have drawn, and then I would put a buy / sell stop one tick above / below the bar that broke the TL. This will often allow me to confirm that the TL is actually broken, and it keeps me out of some (not all) fakeouts as well.

CL Redux thread.... could you provide this live link pls?

did not mean to laugh at or belittle any potential trader at all....

just wonder with so many hand drawings going on, how does one concentrate and find time to enter and place stop.... K?

i always like to watch and learn from all those who place live orders showing entries and exits and stoplosses all wrapped up and bundled together to show planning, predetermined risks and predetermined extension of profits or losses; particularly on crude, gold and russell....

yes, i am also a bar closed trader.... thx for explanation.