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.
Today was Wednesday the day that they report the oil inventory number. As I said in a previous article I do not recommend trading oil the day that they release the oil inventory because the volatility is extremely high which makes reading the auctions extremely difficult.
If you decide to trade anyway I would suggest that you split your profile starting a new profile at the letter D or the period from 10:30 to 11:00 ET. That way I trade before the number , get flat for the number and start trading again the new profile after 11:00 ET.
Today was a wonderful day to trade.
Here are the important factors coming into to this day :
Yesterday's profile was showing a b formation which means that yesterday down move was probably due to long liquidation. The volume was also light confirming the weak down day.
The b formation also is telling us that longer term traders bought for long term purposes not short term. Also not only traders liquidated their longs but fresh new short term shorts were established. This is alo confirmed with yesterday's poor low.
So the scared money was short in the b part of the profile.
On the open the confidence was low as we open inside yesterday's range and value and as the tempo was slow when the market started traded down right from bell. Yesterday's settlement acted first as a resistance and the first auction target was yesterday's poor low. As soon as the market rejected the low with slow tempo that was the first setup for a long. It was indicating that the day timeframe was in control of the market and the inventory was still too short from yesterday as yesterday's poor low held.