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Oil, the ASX and Einstein.

Oil, the ASX and Einstein.

The definition of insanity according to Albert Einstein is: “Is doing something over and over again and expecting a different result”. Who am I to argue with the dishevelled genius?

So what has this got to do with trading I hear you ask? Lots, I tell you lots! The whole reason technical traders use charts is because history repeats itself in the markets as it does in life. If we do the same thing over and over again we can expect the same result. Obviously we won’t always get the result we expect but probabilities will work in our favour if we have an edge and work it.

This brings me to the recent move on the ASX. Only yesterday I posted a video on the ASX and the level of 5000. I covered many timeframes and built my thoughts on this market. I suggest you watch it as it was recorded before the big move yesterday and will add value to this post.

Now that you have watched the video, let me show you the similarities to the West Texas Cash market (below). This chart is a weekly chart and is looking very similar to the ASX was before the break of support. The weekly candles remain bearish and in the MA “sell zone”.20150930 twp1Now have a look at the daily (below) as it will give more detail. It is clear that the horizontal line I have drawn above was an old level of support going back quite some way; this is similar to the ASX. Note also that the lows which offer support are also roughly into the old lows created a few months back? I would also like to note the lower highs moving into the support level too. This once again is similar to the ASX yesterday.20150930 twp2Finally, I want to show you the 4-hour since that was where my video ended yesterday (below). The support level is becoming more obvious on this timeframe, although there isn’t a trade setup for me just yet, the level remains strong and one I will be watching closely. I would love to see another test on the support with a lower high for my stop loss. This is pretty much the exact same comments I made on the ASX in the video yesterday.20150930 twp3

So does this mean that oil will break and fall hard like the ASX did yesterday? No not at all, this may or may not happen. The point I am trying to make in this post is that the markets do repeat patterns and this is the exact reason traders like myself rely on technical analysis and form strategies around this repetition. Happy trading!

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