Thursday, January 28, 2016

5 Trades for Friday | Crude Oil, Gold, E-mini & Euro Futures 01/28/16

“We must all suffer one of two things: the pain of discipline or the pain of regret and disappointment.”

Notes for Tonight’s Newsletter:
Crude Oil is bullish after an explosive move higher today, and after a mid-morning correction it looks like the bulls might be ready to take the next leg higher, but the bulls need proof before they buy the next pullback.  We can see a bull channel with an overshoot at the highs, followed by an overshoot at the lows and a measured-correction off the highs which ended in a trading range this evening.  The trading-range has a bearish-bias so we will expect sellers to 'fade' this break higher, so we will be looking for the PROOF we need on the next pullback.  If the bulls can hold this pullback that will give them the confidence to make a run back to the 34.80 highs, but if they fail we will likely see a re-test of the support levels at 32.88 and 32.31 before the buyers get another chance to take it higher.

E-mini S&P is stuck inside yesterday’s range with a narrowing triangle this evening which tells us to fade the breakouts until we see this market find a new direction.  Today was an 'inside day' which means we traded inside yesterday’s range, and these types of days usually lead to be head-fakes at the highs and lows of the range before the market finds a new directional trend.  The most common scenario on 'inside days' is to see the first breakout fail and then continue in the opposite direction for a few days afterwards, so we will be watching for failure patterns at the highs and lows and then paying attention to the opposite side once it rotates back again.  There is a chance that tomorrow may be a strong breakout day, and if that occurs we need to follow that direction.

Gold is bearish this evening but after a completed measured-move and an overshoot of the channel lows the sellers will be waiting for a bullish correction to sell more tomorrow.  Keep in mind, we are going through 'contract rollover' to the GC 04/16 contract so volume is a bit off this evening but there's no doubt about the context on the chart.  We have a bear channel with an overshoot and a completed measured-move.  Sellers will want to see price 'trap high' to get some buyers involved before they sell it back lower, and if the market collapses lower (it’s been that type of week) then we will be looking for a third symmetrical leg.  We can start buying ONLY after we see a new higher-high and the bulls can hold a pullback.

Euro is bullish but trading at the highs of the channel and after three strong pushes higher today we know the buyers will be looking for a DEEP correction off these highs before they buy more.  We have multiple channels in play this evening; the long-term channel has 3 legs higher, and today's channel has a perfect measured-move completed and it appears the buyers sold everything at the highs to wait for a better price to buy it back lower.  Sellers have a chance to get 'short' if they can hold the next pullback, but the most reliable trades will come after a 2-legged measured-correction off today's highs for the next buying opportunities.

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