Duxon's Journal on Trading Metals

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CRUDE OIL

With crude oil, it's the consensus opinion of the slopes of the two-, three- and four-hour baselines, and just as importantly, the location of price within the three-hour price range envelope at 0.70% deviation.

But, what about when oil isn't swinging wildly from one side of the three-hour envelope to the other?

Well, drilling down to a lower time frame finds the 40-minute channel at 0.65% deviation hinting at oil’s intermediate trajectory from an intraday standpoint. But, due to the fact that oil's helter skelter nature renders this measure, like several others, fairly unstable, it's probably better to move up to the 70-minute measure to create a more orderly forecast model, even if it is a little bit lagging.

Here, oil often pulls back to the 0.20% deviation level, and surges to 0.40% deviation and beyond. However, at other times, the amplitude of oil’s waves barely register, which makes it necessary to introduce a 60-minute temporal support/resistance channel, which can be used in concert with the three-minute envelope at 0.04% deviation to register reversals in the immediate trend when volatility is extremely low, and in tandem with the three-minute channel and ten-minute baseline to recognize reversals following more radical moves in price action...

This would have 10-minutes defining bigger moves, but joining with the 40-minute baseline to try to distinguish between bona fide reversals as opposed to head fakes during oil’s more massive excursions. That's a big jump however between 10 and 40, so it would probably be advisable to throw in the 24-minute baseline in the mix to assist in the job by splitting the difference.

 

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SILVER

The key with silver is the relationship of 23-minute price action to 60-minute price action, AND a minimum amount of slope in the two-hour baseline.

Note how often trades would have been profitable if you had entered positions when the two-hour envelope was sloping in one direction and price pulled back to the contrarian band of the 60-minute channel.

 

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NATURAL GAS

 

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COMPARING GOLD TO SILVER

Given that BOTH gold AND silver are basically trading off a two-hour core, why can't you just transfer the same chart configuration from one metal to the other?

For one thing, gold does not interact with the 60-minute measure in the same way that silver does. For example, gold almost never pulls back to the contrarian band of the "60-minute core." And whereas the 10-minute envelope at 0.02% deviation pretty much engulfs the price action making up gold's short-term trend, it doesn't even come close to doing the same with silver. Not to mention that gold's pullbacks are tracked by the ten-minute measure, whereas silver needs something more substantial, like 17 minutes at 0.10% or 23 minutes at 0.20% to do the job.

And this is just what I see based off a quick glance. Who knows what else I might notice if I compared and contrasted the two more minutely?

 

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At 10:00 AM PST Nadex was no longer offering two-hour binary option GOLD contracts. So, I need to check tomorrow to see if they're still available at nine (if I remember).

Yes, they're still available at 9 AM PST.

 

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Other than a few details I added to my private notes, I think this is all I have to write. I've been very pleased with the results when the observations made here have been acted on during live trading, and if fact, this exercise has even simplified and improved on my efforts in the Forex market as well. All in all, a very worthwhile little project.

 

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I've found that price action of the four commodities offered by Nadex is much more "definable" compared to that of foreign currency pairs, equities and major U.S. indices. And given this observation, I'm thinking that one of the best times to purchase corresponding in-the-money short-term contracts might be during the last hour they're made available, after things have pretty much calmed down. So, as a reminder to myself...

• The last opportunity to trade a short-term binary option GOLD contract via Nadex is 9 AM PST.
• For CRUDE OIL it is 10 AM PST.
• For NATURAL GAS it is 10 AM PST.
• And what about for SILVER?

I also want to begin noting what each of the assets does during peak liquidity/volatility...

Wednesday | March 20, 2024

For NATURAL GAS, it perked up around 4:45 AM PST, and went monster bullish by 5 AM (spending most of its time within the top third of the twenty-minute price flow channel, between 0.30% and 0.87% deviation), maintaining this attitude until around 5:50. At that point, it executed a steep dive, plunging until 6:20, from where it climbed sharply until approximately 7:20. It then fell until 7:42, thereafter assuming "normal" fluctuations within the inner bands of the 20-minute price range envelope.

GOLD took a giant leap during the 15 minutes between 6:55 and 7:10 AM. But then, drifted back down and acted "normal" until the the 11 AM USA Fed Interest Rate Decision.

SILVER more-or-less meandered along following the 13-minute path until it broke out at around 6:30 AM (the same time that natural gas began climbing sharply). It began winding its way back down at 7:22 AM (again, the same time as natural gas), at which time is was back within the 17-minute price range envelope until the release of economic numbers at 11 AM.

OIL exited neutral at 11:42 PM last night, but did nothing out of the ordinary. It simply followed the lead of the 30- and 60-minute baselines, remaining within the lower half of the 70-minute price flow channel until 11:00 AM, exiting the launch pads and arriving at the landing sites defined by the 60-minute temporal support/resistance channel, and respecting the boundaries of the 40-minute price range envelope at 0.65% deviation.

SUMMARY: So then, between 7:30 AM and 11:00 AM, all four commodities were once again exhibiting "normal" price action.

 

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You previously wrote that “the limit to which gold is typically willing to pull back to the contrarian side of a sloping 2⅙-hour price flow channel is defined by the contrarian band of the 60-minute price flow channel at 0.10% deviation." This was because you regarded the 2⅙-hour channel as gold's core from the perspective of intraday trading.

However, in analyzing gold's behavior during the previous 24-hour market cycle, I would submit that it's possible gold's true core is much, much faster—the 17-minute channel to be specific.

And besides…you also wrote that "the 10-minute envelope at 0.02% deviation pretty much engulfs the price action making up gold's short-term trend" AND you wrote "gold almost never pulls back to the contrarian band of the 60-minute core."

The latter comment would indicate you already regarded the 2⅙-hour measure as too slow to accurately reflect gold's intraday trajectory, and the former already hinted at the possible need to assign the asset's shorter-term measures greater significance.

One observation that has NOT changed is that when gold pulls back, it virtually never does so very dramatically.

And the final past observation I want to mention here is that you wrote "gold is hard pressed to maintain surges beyond the thee-hour 1.00% deviation level, though this CAN occur on occasion."

Well, in terms of the 17-minute price flow, yesterday gold spiked to the 1.65% deviation level! But, it was there only momentarily. The vast majority of the time (so far), the most extreme level to which it is typically willing to separate from the 17-minute mean is 0.60% deviation, with 0.45% being even more common.

Gold seems to have a "user friendly" habit of tending relatively smoothly until it is ready to reverse direction, so that pullbacks greater than the 0.09% deviation level of the 17-minute core are rare, something that should greatly facilitate the selection of Nadex two-hour binary option contract strike prices.

 

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SILVER more-or-less meandered along following the 13-minute path until it broke out at around 6:30 AM (the same time that natural gas began climbing sharply). It began winding its way back down at 7:22 AM (again, the same time as natural gas), at which time is was back within the 17-minute price range envelope until the release of economic numbers at 11 AM.

Silver is kind of a "flakey" commodity, and as a result, the 13-minute path is not to be trusted. So then ideally, you're looking to enter positions when price is coming out of pullbacks in the 17-minute trend, behind the six-minute price flow channel to the contrarian third of the 8½- to 9-minute price range envelope (if it will opt to retreat that far), though during sharp trends, you might have to settle for the contrarian half.

Silver has been active (vacillating up and down) from the start of this 24-hour market cycle, but began a fall at 1:00 AM PST that took it significantly below yesterday's high by 2:03 AM, at which point, it began climbing again until it reached a local high 20 minutes ago at 3:19 AM.

 

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Yesterday natural gas was dead from 6:55 PM PST until 12:15 AM the following morning. I'll want to see if it picks up significantly somewhere around 5 AM, like it did yesterday.

Crude Oil took a plunge at 1:19 this morning, then went more-or-less neutral by 2:06.

Gold swings so wildly, it's hard to pin down. It looks like probably the safest thing to do is to wait until the three- and seven-minute trends are in sync. Even the 17-minute measure is unable to keep up with gold's price action, and the one-minute price range envelope, which tracks it well, fluctuates way to frequently to be trusted.

Gold essentially died around 7:12 PM yesterday evening and stayed that way until just before 11 PM.

Tweaking an earlier thought... "It looks like probably the safest thing to do is to wait until the three- and seven-minute trends come into sync AFTER price has pulled back to the 20%, 45% or 60% deviation level (or beyond) of the 17-minute channel(s) and is coming out of the relevant/corresponding retreat.