CL trading day October 4 2017 PM

posted in: Market Recap 0

Oil inventory release day …

CONTEXT

  1. 2-day balance. ( 50.73 – 50.07 )
  2. Poor High from yesterday. ( High of balance )
  3. Poor Low from yesterday.
  4. Overnight inventory was ambiguous.
  5. Opening inside yesterday’s range.
  6. Very prominent POC from yesterday.
  7. We have re-entered weekly and monthly balances below 50.90.
  8. Oil inventory release.

Balance rules in effect. The open was close to the middle of the 2-day balance and the release was due for 10:30AM Est. So no real good opportunities before the oil inventory release.

 

 

Now I would like to show you a real good opportunity. It happened right after the release. In the image on the left you can see a P formation during the D period from the Volume Tracking Indicator ( VTI ) template. The P formation is a short covering pattern. I drew a line at the VPOC level and waited for rejection.

It came on E and F periods when we traded back close to the VPOC level of the D period P formation. Also look at all the weak buys from the Market Profile chart on the image at the bottom showing weakness from the buy side.

Think about this for a moment. They bought the bullish oil inventory number but it was bought by short to cover their positions. No real new money came in.

 

 

 

What does that mean ?

Weakness on the long side !

Target 50.07 which is the 2-day balance low. The market traded as low as 49.76. The low of the previous day balance from September 18 was 49.68. We came really close to that level.

Please note that G period formed a b pattern on the Volume Tracking Indicator ( VTI ) chart confirming that the very short term inventory was probably too long and a long liquidation followed. This is what we expected based on the previous analysis.

A long around to 49.73 level would have been a good risk – reward trade considering the warning in G and the previous day balance low of 49.68 as well as September 19 low at 49.73.

Always ask yourself about an auction :

  1. Is it old business or new business or both.
  2. If inventory correction – far enough to fully correct inventories.

The market traded lower in H period but came back inside the 2- day balance in I period. The warning in G ( b formation ) showing no new money coming on the short side proved to be useful as the market never traded below H period low and found value around the 2-day balance low.

 

 

The nuances today were related to P and b formations on 30 minute volume bar profiles from the Pro Suite Volume Tracking Indicator ( VTI ) template showing auction weaknesses inside a day balance area.

 

Good Trading !