Thursday, March 24, 2016

Crude Oil Trading Recap

WTI Crude Oil opened below the ETH (Electronic Trading Hours / Globex) volume value area. Before the London open the market formed a poor high and I have expected a test of the VVAL level for a potential short trade but the market sold off in the overnight session without a meeting with that lovely location.

Looking at the weekly profile, we can identify the nice support from the previous week's VPOC and POC in an acceptance area:

That level was confluent with the NPOC (TPO based) around 38.35 on the daily profile chart. Actually, I gone short too early around the 38.75 VVAL level and paid my impatience with a stop out. However, the reaction around the mentioned NPOC and the following long trade paid me back quite well.

That said, emotional calmness after a stop out is pretty lucrative. Anyway, stay tunned for a pre-analysis later this weekend on CL.

Have a great weekend!

Euro Bund Trading Recap

Absolutely, Euro Bund made the most sense for me today. There was such an honorable confluence in this market that I was able to fall in love with it. Obviously, I was in such a degree touched that I have sent my fist to the air and shout: yes. The best is: I can keep it simple here. Looking at the weekly profile, we can identify a previous acceptance area and additionally a VVAH (Volume Value Area High) close level that is confluent with a VVAH level from the daily profile chart. That's it.

Here the weekly profiles:

Here the daily profiles:

At the open I thought about a possible long trade from yesterday's VVAH level but the market took out the poor high and moved to the north. Anyway, stay tunned for a pre-analysis on the Bunds this weekend. Actually, looking at the charts, it should trigger a possible Déjà-vu in your mind right now.

Wednesday, March 23, 2016

Stop Scale Out Method

Additionally to the Tactical Risk Management with the scale out method discussion, I thought about the possibility to scale out of a losing trade and how this would look in a potential trade scenario. So, I've added a third column to our known figure that compares a normal Scale Out Method, No Scale Out Method (All-In/All-Out) and the additionally Stop Scale Out Method.

The trade scenario: 3 Contracts, Target: 5 Points, Stop: 3 Points. The Stop Scale Method scales out of a losing trade at 1 Point, 2 Points and the final third contract at 3 Points with a static (All-Out) 5 Point profit target. One thing to make clear: This is one possible trade scenario, so preferably avoid thinking we want to trade always with a 5 Point Target and 3 Point Stop. It depends on the trade situation and the situation adjusts the risk parameters (Stop/Target) higher or lower. Anyway, here the figure with the additionally Stop Scale Method:

Tuesday, March 22, 2016

Crude Oil Market Observations

As a follow-up of the video analysis I thought to share some updated observations on Crude oil. Especially to point out is the mentioned rotational market behavior around the acceptance area in the weekly volume profile. Here the current supportive level as well as the resistance area from the weekly volume profile:

Looking at the daily profiles, we opened inside of the volume value. So, a possible rotational behavior between the value extrems was pretty expected. If you consider the weekly levels over the daily levels, you can quickly understand today's market action. However, it seems like our lovely 'P' shaped profile is visible and additionally we opend above the TPO value. Why not consider the VPOC and the TPO VAH as support then? Firstly we did not took out any high or low in terms of grabbing liquidity. Secondly, again the weekly levels are more important that the daily areas of interest.

If we take a look at the plain daily perspective, we can observe the seeming end of a three day one-time-framing higher behavior as Friday's low got taken out yesterday. Actually, the market closed above Friday's low, so we can't consider this as a break, I guess. However, we can conclude that buyers and sellers are in agreement of this balanced price range and awaiting the Crude oil inventories this week so far.

We should also take a look at the weekly timeframe by the way. Looking at this, we can identify a on time framing higher behavior that is occuring since several weeks. Also to notice is this previous small balance area that seem to serve as resistance currently.

We will see in which direction the market will break. Anyway, I will monitor today's close for any possible indications to conclude a possible "break-out because of inventories" scenario for the next day. Stay focused.

Monday, March 21, 2016

Crude Oil Video Recap and Analysis

Here is my first video recap and analysis on Crude Oil. Don't go crazy with me as english is not my native language. I apologize for any spelling releated mistakes here. I will keep improve my ability to provide a better video for sure, so any feedback is welcome. Actually, I messed up the shitty end of this video as the music plays later, lol. Anyway, hopefully you can enjoy it in some way and maybe I have to stick to the text format analysis:

Here the link to the video.

Sunday, March 13, 2016

Crude Oil Volume Profile Observations

As mentioned last week on Twitter, I thought to provide some observations with TPO and volume profiles. We will take a look on the WTI Crude oil market as it seems most traders are in love with this lovely beast. However, you can use this process on any other market as well.

Last week we discussed the importance to assign a filter process in order to better understand what the larger picture is showing. With going through the periodicity hierarchy of Yearly, Monthly, Weekly timeframes we can understand the higher time frame (HTF) and figure out the path of least resistance. That said, you can use this filter process on TPO/Volume profile charts to find some nice additional levels in the overall macro structure that are confluent with your intra-day trading levels.

When looking at a Volume Profile, we are looking for areas of acceptance and rejection. In acceptance areas market participants are in agreement on price while in rejection areas, one side of the market participants are not interested on a particular price and quickly reject these levels. Actually, you could call acceptance areas balance while rejection areas would be the extremes of that balance. Well, why identifying thes areas on a higher time frame now? The answer is quite simple: An intra-day level has less significance than a weekly level or a monthly level because the large market won't recognize the day trader’s shitty little whatsoever level when the market rejects the monthly profile's low volume area. This is the reason of the importance to figure out the path of least resistance on a macro scale.

Let's try to visualize this now. Looking at the monthly profiles, we can observe that the market opened inside of the previous month's balanced range and value. The conclusion would be a rotational behavior for this month and to trade the balance extremes of this profile. However, the previous month's high got taken out and we broke out of that balance to trend higher. Here a screenshot with the mentioned acceptance/rejection areas:

As you can see the rejection areas served as nice support/resistance levels. I also drew the distribution curves into this profile to highlight the acceptance areas (black).

Looking at the current month, we can see a current weak high and low. Also to mention is the weak high back from January. Poor/Weak/Unsecured highs and lows are potential areas to revisit.

Before we getting biased, let's take a look at the weekly profiles. The previous week rejected the previous highs and was quite rotational with a close inside of the time value and above the volume value. Based where we closed I plotted some potential scenarios into this chart for the next week. To mention is the current unsecured low as a potential area to revisit.

Moving forward to the daily profiles, we can cleary see our favorite 'P' shaped profile. A P shaped profile as we know suggests short covering. It seems the market grabbed some liquidity above the highs. With that said, I am quite bearish for the next day. The open and the reaction around value/POC will have a significant effect on how I handle the market. Based where the market closed I would look to short the VPOC with a target around the next liquidity area. A break above could lead us to higher prices obviously.

However, these are my own current views and could change with the time moving forward. Please do you own research because I posted this analysis process just for educational purposes only. Moreover it's only one brick of my whole analysis process. I would share some more details but the time is precious. I thinking about to create a video or do a livestream for the next time as it takes a huge amount of my time to write posts.

If you want to learn more about Market Profile take a look at the books from Jim Dalton. Recommendable is Doug Tucker’s Market Profile Primer and the original CBOT Market Profile handbook if you like free stuff. If you are a member of The Private Banker you can read educational articles about the Market Profile and the Volume Profile as well.

Let's do our best next week and as said I will try to create a video next time. Anyway, hopefully this article is of some help for you.