Right now it’s the bears controlling oil prices and sending them lower. It’s become quite a topic of interest not only among traders but also in the press. I have been bearish crude for quite some time simply due to the lovely down trend; I am currently flat crude and looking for a chance to get short.
So what am I looking for?
In order to explain this best I need to look at where crude has been. Check out this monthly chart for example (below). The green line is $80.00 and it is very clear to see that price has reacted to this level many times in the past and in fact goes back to July 2006. Also worth noting is that the monthly is now in a down trend. Notice that for the entire period shown in the monthly chart below has it been in a downtrend – until now!
Price has recently broken down through $80.00 convincingly on the weekly (below) and although it has moved a fair way from its moving averages there is no real sign of it pulling back.
Now for the daily chart (below). I love the look of the daily. It has reacted to support at $80.00 3 times or so and then smashed down through it with ease. This shows me there was a lot of selling momentum on the break and even though I didn’t trade the break down I intend to trade any pull backs to this level.
I can imagine that you are starting to get an idea of what I may be looking for here on crude. If I was to be offered a small red candle on the daily chart then this would potentially give me a trade. Failing that I would be happy to look at the lower time frames and in actual fact my focus right now is on the 4 hour chart (below).
For those of you who have been through the Premium Education Course that CMC offers its account holders then you will likely already know what I am looking for. For the benefit of those who are yet to go the course, I am looking for a small bearish candle in the MA zone. This is my preference right now on crude oil to join the trend lower. If I get the perfect trade does it mean crude will continue to fall? Of course it doesn’t but I love trading a market that is trending so well and has so many variables coming together at the same point. If I get the trade and it fails there was nothing else I could do. With trading always comes risk, I accept this risk and manage it as do all good traders. For now though my eyes remain peeled for the perfect trade to join crude oil short.