Today Crude Oil offered us two good opportunities with good risk-reward potential.
There were a few resistance levels right from the start that I have mentioned in my twits this morning. Yesterday's low at 44.41 and the high of the lower distribution from yesterday's profile at 45.19.
Furthermore overnight inventory was short when the bell rang this morning as we opened on a gap down. The Gap rules were in effect.
What are the gap rules ?
Here is how we should have traded crude oil futures today based on Market profile Auction theory. From a proud student of Jim Dalton.
Today was the day of the oil inventory number. It is quite dangerous to trade before this number as the market usually exibits low volatility and just wait for the number at 10:30 EST. If you don't trade the number there were only a few opportunities offered by the market today. The first good opportunity came around 11:00 when the market rejected the overnight high.
Today was a dream day for trading crude oil as the market offered two distinct nice trends. Down in the morning and up in the afternoon.
Two great trades were signaled , a short in the morning and a long at midday.
First we opened in balance inside yesterday value. Again this indicated that the expected opportunity and risk should be small. It turned out to be much more interesting in terms of volatility and opportunities.
Here is the context before the open :
Long and intermediate trend are up ( weekly and monthly bar charts ).
Short term in balance ( 106.93 - 105.11 )
Overnight inventory was neutral.
Poor high from yesterday indicating that the market was too long as of yesterday's close.
We had anomalies from yesterday profile aroud 105.90-106.00 and 106.25-106.35 levels.
Yesterday's afternoon pullback low indicating possible change was at 106.02.