CL Trading day November 8 2017 PM

posted in: Market Recap 0

Oil inventory news day ….

Context :

  1. Oil inventory number release at 10:30PM.
  2. Day, month and week up trend.
  3. Yesterday balance and inside day.
  4. Overnight inventory short. ( pivot 57.02 ).
  5. Short term inventory long. ( pivot 57.13 ).
  6. Yesterday’s prominent POC ( 57.17 ).
  7. Three poor lows from the daily chart.

 

Today was a great trading day for educational purposes.

That was the oil inventory number and volatility was to be expected. The two inventory pivot levels were my main focus at the open.

If you look at the image on the left you can see that I have merged the previous two pit profiles to give me a clearer picture of the short term inventory.

The orange profile is the overnight market. The two lines drawn were the short term long inventory pivot ( higher line ) and the overnight inventory pivot ( lower line ). We opened right in that range where short ( from overnight traders ) and long ( from short term traders ) inventories were uncomfortable. We broke the lower level which was the overnight pivot level and increased the odds of short term long inventory liquidation.

 

 

 

On the number release the market went down further cleaning the long inventory of the past two days.

Now here is the analysis that should have emerged on the number release ( “D” period ).

  1. All or most of the weak hands longs were out of their positions.
  2. Overnight inventory was short.
  3. Day traders inventory was short.
  4. New short term traders got short on the down move following the US oil number release.
  5. Month and week time frame is in an up trend.

 

Inventories were short but medium to long term trend was up. I know this is extremely difficult to think about buying here. The main reason being that most traders are price followers.

The high volume range 56.68 – 56.49  developed in “D” period low was a warning that the market was struggling on the down side creating the buying opportunity.

Now think about that opportunity. You have an opportunity to go with the main trend catching all the accumulated short from overnight, day and short term traders !

We had to go against the one time framing, POC down migration and lower developing value. The context here ( all short term inventories short against the main up trend ) was overriding these strong bearish factors.

It takes a very good market understanding and lots of screen time to be able to think like this. Believe me !

 

Now the day was far from over. The expected happened…

All the shorts covered and they brought the market to an extreme level that was hardly imaginable. We traded above Monday high and “G” period range alone was close to 1.00 !

What do you think was happening ? Short covering and new buying money coming from price follower traders.

Which results in what ? Long inventory that became “too long”. ( look at the stable intraday POC ).

Long term stronger traders don’t trade like this. They don’t panic buy so short term and day traders emotions are in action here.

Now what happened from the high ? Long liquidation and new selling money coming from price follower traders.

Which results in what ? Short inventory that became “too short”. (look at the stable intraday POC).

 

I missed the trade on the high but got the one on the low on “I” period. The set up to sell on the high could have been triggered in “H” period when we could not trade above “G” period high.

 

So we had a good market today for educational purposes.

It showed when and why we could fade POC migration and developing value.

It also showed how during the same trading day we could get “too long” and “too short”.

It finally confirmed that the biggest problem for traders is following price. Most traders are price followers. Price is only an advertising mechanism. Step back and look at the whole market context and structure. Without the latter we get stuck with price movement and we take wrong trading decisions.

 

For the best traders ( the one that understand market structure ) today offered extremely lucrative trading opportunities in “A”, “D” “H” and “I” periods.

 

 

 

 

Good Trading !