Posted: 8/22/2012 12:01:52 AM
The scalp trades for today were a success...9701-9711 cashed in instantly as we saw the initial break over 9701 blow to 9725 quickly. This level was tested on the europe close, and again in the first hour of trading this morning, 700am-800am mtn.
Today's high came in at 9785 and the low at 9606.....currently we are sitting at 9672.
On the close today, a sell signal has set up on the daily CL chart. This signal is not necessarily the best signal in the repitoire, but nontheless it is a very good one and fits into what the gameplan is for this week.
So, here is the plan of execution.....breakout play to the high, trend retracement play to the low. Both trades are outlined as per execution below. The first entry price that is hit will be the trade that will be taken, and active, thus rendering the other null.
1) Breakout high: If price continues upward, I am going long at 9786. I expect 60-90 ticks to the upside within tommorrow's session in this scenario. Profit targets will be at 9846 and 9875. This trade will not be considered a true trend play, thus the stop out point will be substantially tighter, near the low of day when elected...as of right now, that is in the 9659 area. 9659 will act as the intial stop out point for the long play. However, as the day progresses, the 30 minute crude chart will be used to tighten the stop (first to the SMA, then symmetrically with the prevalent trend) in order to bring our profit ratios into alignment.
2) Trend Play short: This trade is substantially different in terms of strategy. It is a trend play, so the duration will be greater, the profit will need to be greater as the initial risk is certainly greater. So, if price falls, I will be going short at 9605. Maximum low is in the 9454-9379 range. Good play here for 100-125 ticks. Initial stop is expensive...it will be set at 9786. Profit targets will be set at 9505, 9480 and one contract will be left on to run wild, looking to catch a substantial downtrend down to 9000. This trade could possibly take until the end of week to see the profits. At tommorrow's session's end, the stop loss will be adjusted, and position evaluated. Tommorrow is the crude inventory reporting day, that may add to the noise...it is very possible to see wild swings, the main objective is to close on a down note.
In my mind, the ideal scenario is for tommorrow's trading range is to trade inside of today's range...9785-9606. This will set up a very favorable compression pattern (similiar to a basic pennant formation) on the daily chart. Such a setup will enable me to employ a very high probability strategy that is geared to play Thursday's breakout either way.
As of right now, price is at 9677, so it is anyone's guess which trade will become active, or if we will trade inside of today's range. Those are two very different types of trades....as a preference, I would like to see the rally continue, as that seems to be the path of least resistance.....but even though the short play may take longer to cash, it stands to be more profitable if successful.