Tuesday, September 20, 2016

6 Trades for FOMC Day | SchoolOfTrade Newsletter 09/20/16


"Only those who dare to fail greatly can ever achieve greatly."
Notes for Tonight’s Newsletter:
We're gearing-up for the FOMC Announcement tomorrow afternoon, but that doesn’t mean we can’t find some reliable trading opportunities in the first half of tomorrow's session, and of course we have a solid plan of attack; Crude Oil is ‘parabolically-bullish’ after this evening's 'API report', E-mini S&P is trading in a very similar situation as yesterday, Gold is range-bound (surprise!) and Euro is bearish after successfully filling the 'gap' from yesterday’s low.


Crude Oil is parabolically-bullish after this evening's 'API report' and trading at the highs of a bull channel which means the sellers will be trying to 'fade the news' back to the low of the channel while the bulls are trying to stay patient to see if this market wants to hold the support trend-line and keep going, or wait for the opportunity to buy this at a cheaper price.  The most reliable trade for the buyers will be to wait for either a 2-legged-correction off the measured-move and then look for seller-failure to buy it back to the highs, or get a strong breakout-pullback above the measured-move, or wait for the sellers to finish their work back to the lows and then look for buying opportunities off the lows of the channel.  Basically, the buyers need to see proof that this party is going to continue or they need to wait for a deep pullback to get into this at a cheaper price.  Sellers on the other hand have zero proof and don’t want to get caught trying to sell into a runaway market like this so the best option for the bears is to wait for the next pullback to fail and then see if they can get their own pullback to hold for a big collapse back down to the lows.  When it comes to selling, there is so much open space below us that it makes no sense to try and force it, so stay patient until you see proof.

E-mini S&P is trading in a very similar situation as yesterday, at the lows of a range, trying to complete the move to the low of a channel and with resistance waiting overhead.  Buyers will want to buy the lows of this range, but the top of the channel is in the way, and sellers will want to sell the next pullback, but that forces them to sell the low of the range, neither of which is going to be easy ahead of a little news event tomorrow called FOMC.  Just like we said yesterday, the buyers need to see a strong breakout that can hold a pullback above the high of the channel with a target going back to range highs, while the sellers need to see either a strong enough move so they can get the moving-average below the range or they need to wait for a bull-trap going back into the range and then sell it back down again tomorrow, and it has to be done before lunchtime because volume will dry up ahead of the news.

Gold is range-bound this evening, which is no surprise ahead of the FOMC Announcement tomorrow afternoon, and tells the buyers to look for seller-failures at the lows and sellers to look for buyer-failures at the highs of the range while avoiding the temptation to trade in the middle.  The bear channel is a decent clue that the sellers may have the upper-hand for a move back to the lows, where we assume that buyers will be waiting. And we can also see a failed-attempt from the sellers to test the 1315.0 area earlier today which may have prices pushing up to the highs.  Not to worry, we don’t need to know direction, we just need to know location, and right now we're in the middle of the range, so unless you're already long off the range-low, we have no other choice but to wait for a breakout and then look for the failure.


Euro is bearish after successfully filling the 'gap' from yesterday’s low and sellers, not wanting to sell this low, will be looking for a bullish correction to sell while the buyers (who have zero proof) will need a strong break higher that can hold a pullback for a move up to the battle zone tomorrow.  The two big clues on this chart are the spike & channel and the gap; the spike and channel tells the sellers to look for traps and buyer-failures up at the resistance levels overhead for a move back down to re-test the lows.  The gap-fill tells us that we can expect buyers at the lows, if not only from sellers taking profit after the buyers failed off the highs earlier today.  Sellers need to wait for a correction higher or they need to see a TON of strength through this measured-move and the buyers need to get back above the moving-average and hold above the channel highs if they want any chance at a move higher tomorrow.

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