Thursday, January 16, 2014

Friday’s Trading Strategy | SchoolOfTrade Nightly-Newsletter 01/16/14

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”  - Michael Jordan

Reflections from Today:
·       Markets mostly flat on the session today, as we predicted after a busy Wednesday session
·       Jobless Claims today came in as-expected at 326k
·       January Philly Fed Business Outlook came in higher than expected
·       December Consumer Price Index shows prices are stable
·       Equity markets tumbled this morning on poor earnings from Goldman Sachs, Best Buy and Citigroup
·       Gold ends the day flat @ 1241.90
·       Crude Oil ends the day flat @ 94.20
·       DOW Drops -.40% to settle at 16417
·       Mini-Russell manages to stay above water on the day
·       Next Week:  Contract Rollover on Crude Oil to 03-14
·       Next Monday:  Martin Luther King Jr Holiday, Markets all closed.

Today’s News:
January 16, 2014

Soft earnings from Citigroup and Goldman Sachs pulled down stocks with the Dow slipping 0.4 percent to 16,417.

The day's economic news was mixed, led by another soft consumer price report that points to the need for increased price pressures.

Initial jobless claims are pointing to steady conditions in the labor market while the Philly Fed report points to rising output and employment in the region's manufacturing sector despite a slowing in new orders.

The housing market index is also mixed, showing respectable confidence among home builders but at a slightly lower level than December.

Economic News for Tomorrow:
We have a lot more Red-Star news to be released on Friday morning, starting with Housing Starts at 8:30am EST.  If you recall, housing starts soared higher in December of 2013, so we will be curious to see if that trend continues.

At 9:15am EST we hear from Industrial Production, which also ended the year 2013 on a very high note.  We will be listening in to see if our industrial sector of the US is continuing to improve.

Our final news report of the morning tomorrow is from Consumer Confidence.  We recently saw very strong consumer spending in retail sales earlier this week, and there was a big improvement between the November and December Consumer Confidence readings in 2013 which tells us that we ended last year at the highs…but will it continue?

tomorrow's news
8:30am      Housing Starts
9:15am      Industrial Production
9:55am      Consumer Confidence

Day trading plan for Tomorrow:

Crude Oil:

VIP Chart:  
Crude Oil VIP Chart
If you listened to Wednesday’s Nightly-Newsletter you heard me talk about a likely sideways-trading-range in today’s trading session if we didn’t open above the 94.64, and that’s EXACTLY what we got.

We can see the 2-day relationship is sideways, we never left Wednesday’s trading-range at any moment in today’s trading session.

We can see a narrow trading-range and a closing-print right smack in the middle of the trading-range for today.

These clues tell us that we are trading in-balance, neither the buyers nor the sellers have the edge in the market, and tomorrow will likely be a MUCH wider trading-range type of day because of the narrow range we saw today.

Anchor Chart:
Crude Oil Anchor Chart 1
We got exactly what we had expected from Crude Oil futures this morning in the US trading session.  After Wednesday’s rollercoaster ride it appeared today was a day of rest of the price-action on Crude Oil.

We can see a new price wedge (consolidation) on this anchor chart, along with flat moving-averages and sitting on top of the 94.00 big-round-number.  This chart tells us that we now need to wait for the next big move, and we don’t care if it moves higher or lower.

Crude Oil Anchor Chart 2
This consolidation of price tells us exactly what we need to be waiting for tomorrow.  Our plan for tomorrow is to buy at support levels below and sell at resistance levels above until that stops working for us.  We don’t know if a breakout of this range is going to keep going, or just become a fake-out breakout and come right back inside this price wedge again.

First, if price falls lower we will buy the support levels below us looking for a price-reversal at 93.69, 93.46, 93.14 and 93.04.  If these levels FAIL to hold for a price-reversal we will then move into selling below each of the levels as a new trend down begins.

Second, if price-action moves higher we are selling at resistance overhead starting with 94.63, 94.77, 95.06, and 95.51.  Remember, if these levels do NOT provide the price-reversal we need we will then look for buying opportunities above each resistance level, which will then become support.


VIP Chart:
Gold VIP Chart
We didn’t get the big move on Gold that we were hoping for today, but we got what was expected considering we saw today’s opening-print inside the range from Wednesday.

On yesterday’s Nightly-Newsletter I said to look for a big move if we opened OUTSIDE of Wednesday’s trading-range, but that didn’t happen.  We opened inside the trading-range from Wednesday which led to a very narrow, range-bound market all day today on Gold.  We will have to wait and see what tomorrow brings.

Anchor Chart:
Gold Anchor Chart 1
We saw a great price-reversal this morning off the level at 1244.2 which we discussed last night on our Nightly-Newsletter. We also see that the support level of 1240.4 has also provided you with many trading opportunities as support below.

Gold is moving higher on the anchor chart, but we can easily see this move higher looks very weak.  I can see a bullish price channel and we are above all the moving-averages so we have the green light to buy with a wave-pattern long this evening or tomorrow morning.
Gold Anchor Chart 2

If price pulls back before it moves higher we are buying at 1240.4, 1239.8 and an easy buying opportunity will come at the trend-line support around the 1237.7 level.
If we go higher from here I am buying pullbacks using our wave-pattern long with a profit-target at the 1244.2 and then 1245.8.  We should expect to see price-action test the Major Reversal level at 1245.8 and then come back down to give us a shot at buying it again.


VIP Chart:
Russell VIP Chart
We got exactly what we expected today from the Mini-Russell when it opened inside the range from yesterday at 930am EST.  On yesterday’s Nightly-Newsletter we said that if we opened above the highs from Wednesday we would see a big rally higher, but we cautioned that if we opened inside the range from Wednesday we would most likely see a sloppy, range-bound market, which is exactly what we saw today.

This evening we have much of the same scenario that we had at the same time last night.  We have a very narrow range, moving sideways with a slight bullishness to the market-sentiment.  We closed today’s session near the highs, and for most of the day today it FELT like the Mini-Russell was going to finally push higher, but it never found a way to stay above the highs at 1170.3.

The plan for tomorrow is to watch the opening-bell closely, looking for clues from the traders entering the market at 9:30am EST.  An opening-print above the 1170.3 and we start buying.  An opening-print inside the range from today will tell us to buy-the-lows at support and sell-the-highs at resistance inside this range once again.  Lastly, if we open below the 1161.9 we will be back below the prior week’s highs, as well as the PLOD from Tuesday and we will be selling short down to the profit-target at 1148.1.

Anchor Chart:
Russell Anchor Chart
The Mini-Russell anchor chart shows us just how sloppy today’s price-action really was.  Look closely and you can see we had higher-highs AND lower-lows in today’s trading-range.  While the rest of the e-mini’s were getting hammered over poor earnings from various companies this morning you can see the Mini-Russell held up nicely during the storm.

We have a long term bullish price channel, which suggests the buyers are still in control, however, the medium and short term looks sideways.  We have all the moving-averages below us, and we recently tested the support zone at 1167.6 and now moving higher so we are ready to buy this evening with a wave-pattern long we just need the entry pattern to get into the trade.

Assuming this price-action continues to stay bullish tonight and into Friday’s session we will buy support levels at 1167.6, 1166.0, and 1164.9 and then sell short below the 1163.5 buy-zone lows.  As we push higher we will use the profit-targets overhead at 1170.4, 1173.0, 1174.5 and 1176.4.

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