Short term traders caught.
Today Crude opened near the low of the 3 day balance. Overnight inventory was long but overnight traders never suffered as the market opened near the high of the overnight session and went up right from the open.
As shown on the image to the left yesterday’s poor low was indicating a possible too short situation for the short term traders right near the low of the 3 day balance and this may well be the cause behind the big up move that brought us close to the 3 day balance high. You don’t see this kind of move when strong hands are dominating. Sudden moves like these are created by market imbalances.
Here I would like to emphasis on something very important. See the image to the right how before the big move the market was dominated by weak hands. It does not mean to go against them ! That’s a huge mistake. Here’s how we have to think : The market is going up but is driven by weak hands. How do the weak hands trade. They have tight stops so if I join them ( and that makes sense because of short term inventory condition ) I have to have tight stops. The more natural but wrong way to think is to go against them because they are weak hands. As long as the strong hands do not dominate they really can bring the market to extremes. If the market signals a possible reversal now we can think about going against them which did not happen today. The market except for one period ( F ) exhibited a one time framing behavior on the up side !
Crude finished very long and we have to keep in mind that it was dominated by weak hands as denoted by the four weak buys shown on the full Pro Suite Market Profile chart image to the left. Notice also that we are now approaching the high of the 3 day balance. It will all be part of our trading plan for tomorrow.
Important level to watch for tomorrow as of now will be the 3 day balance high at 47.67 and 46.91 the afternoon pull back low.