CL Trading day November 1 2017 PM

posted in: Market Recap 0

Oil inventory number and FOMC decision …

Market opened this morning with a gap up so gap rules were in play :

Gap Rules:
a.                  Go with all gaps that aren’t filled relatively quickly. Go with a gap on a failed
attempt to fill the gap that slows in tempo and shows declining volume. This
includes gaps that fail to fill or are filled to the tick and then price is rejected.

b.                   If the gap is filled and value cannot at least become unchanged, relative to
the prior day, a later day move in the direction of the gap has higher odds of
occurring. This is more easily recognized when you have internalized the
concept of trading value rather than price.

c.                    If the gap is filled, the initial destination trade becomes the high or low of the
previous pit session depending if it is a downside gap or an upside gap.

 

These rules have to be taken within context :

  1. Overnight inventory long ( Pivot 55.00 )
  2. Short term inventory long.
  3. Daily, weekly and monthly in up trend.
  4. Yesterday’s and previous day were showing poor high ( have been repaired though )
  5. Poor low from 10/30.

 

So at the open we had a conflict between the first gap rule above ( Go with gaps that are not filled quickly ) and the opening which was below the overnight long inventory pivot at 55.00.

Because of the fact that the market trend was getting old ( ninth consecutive up days ) and was showing some weaknesses with repaired poor highs of the previous two days I put more weight on the overnight inventory condition than anything else. I thought that the current business would be to clean overnight weak hands inventory accumulated at the top.

First target would be the value area of the past two days at 54.08 – 54.03.

I will be honest with you though –  I did not sell around the overnight inventory pivot at 55.00 because of the oil inventory number release at 10:30  EST. I waited for the market to digest the number and sold at “E” period high just below the high volume area traded in  “D” period ( 54.78 – 54.70 ).

I stopped looking for selling opportunity based on one time framing down as we traded near my target zone of 54.08 – 54.03 ( in “F” period ) and brought back the second and third gap rules in play. Developing value was now showing overlapping to higher but I was monitoring its migration to see if it could develop at least unchanged compared with yesterday’s value.

Another selling opportunity came when we traded back to the halfback level in “H” period high. That was the last opportunity before the FOMC interest rate decision. According to the third gap rule the destination could be the previous day low at 53.94.

FOMC decision came out and the market traded down first rejecting the previous day low and trading back up to the intraday POC at 54.33.

Because of the news volatility ( Oil inventory number and FOMC interest rate decision ) only two good trading opportunities came up and it happened in “E” period high after the oil inventory release and “H” period high more than 1 hour before the FOMC rate decision.

 

Good Trading !