Watching for signs of weakness – Trade Crude Oil

As I progress with my trading, I’m finding myself more picky with the trades that I trade. I also like to take the trades off the longer timeframe charts as they are less stressful (though I use the shorter timeframe to enter).

Anyway, have a look at Crude Oil today… I post the 1 hour chart below:

What was interesting to me from this chart prior to the fall (as you see in the price bar one previous to the current price bar) is that the price had lingered around 10700. Big round numbers are obvious places for support and resistance so I’m always watching to see what happens when price (for anything I trade) reaches a big round number. In this case, it presented a problem… for about 10 hours the price just couldn’t seem to get beyond this level. For me, this said to me weakness in the price and an opportunity to trade perhaps… my decision to trade as I mentioned below is made in the 1 hour chart. I then look at the lower timeframe chart to see if I can find something to support my analysis and then an entry. From my chart, you can see that the price pushes and closes above the resistance line (at the first black arrow). This is a bullish sign and most people would expect a possible move further up.. there would be people at this stage no doubt would be be trading this as a breakout. The price then moves lower tests the resistance line… at this stage, there will be those who think that this is a great place for a long and will buy! However, the next bar, a push below the resistance (which have become support) – this is the first sign of something not right. A further move down and the price also tests the resistance again (second black arrow) but fails to go above it… the market then makes lower highs and at this stage I want to go short. I enter at 10680 with my stop at 10720.

I was kinda surprised by how quickly the price did fall. I never like it when it falls like this as it means that you can expect a bounce so I took my profit at 10600 for 80 points which was nice. The market went a bit lower and then the bounce. The price would go lower from here but for me, I’m done.. out of sight, out of mind, move onto the next opportunity.


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Category: Trading