In the final months of 2016 Facebook stock was all over the place. It traded up, down and sideways. Beneath the surface two primal market forces were at work, fighting to control the stock’s direction. On December 30th these forces collided. What happened next was shocking, Facebook popped 8.32% by January 10th.
Facebook call options were up 235.06% in just 11 days. A $1,000 investment would have paid you $2,350 in less than two weeks. And the crazy thing? These events happen all the time, you just need to know where to find them.
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Very few traders know about this phenomenon. Even fewer can spot it at work in a stock before an explosive 196%, 228% or 339% move happens. Now you can find out how it works BEFORE the next event strikes.
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Ray @ the Crude Oil Trader
Showing posts with label events. Show all posts
Showing posts with label events. Show all posts
Tuesday, April 4, 2017
Friday, June 20, 2014
WTI Crude Oil on the Move $112 Next Stop
The energy sector has surged during the last two months which can be seen by looking at the XLE Energy Select Sector Fund. If crude oil continues to climb to the $112 level, XLE will likely continue to rally for another few days or possibly week as energy stocks are considered a leveraged way to play energy price movements.
Another way to look at this info is through the USO United States Oil Fund. This tracks much closer to the price of oil. The only issue is that many ETFs that “try to track” an underlying commodity is in how the funds are built. They own multiple contracts further into the future which does not exactly provide us with the short term news/event driven price movements in the current front month contract as they should.
What does this mumbo jumbo mean? Well, it means funds like USO and the highly respected UNG, and VIX ETFs… (just joking about the highly respected part), fail to track the underlying commodity or index very well when it comes to short term price movements. This means, you can nail the timing of a trade, and the commodity or index will move in your favor, yet your fund loses money, or goes nowhere...
The range of the ascending triangle provides us with a measured move to the upside which is $112. Typically the first pullback after a breakout can be bought. The first short term target to scalp some gains would be $109, and at that point moving your stop to breakeven is a wise decision. Trading is all about managing capital and risk, if you don’t, then the market will take advantage of your lack in discipline.
Looking further back on the chart, you can see the double bottom formation also known as a “W” formation. Once the high of the “W” formation is broken the trend should be considered neural or up.
Also note that the RSI (relative strength) has been trending higher for some time now. This means money is rotating into this commodity. This is in line with my interview this week with Kerry Lutz and my recent article talking about the next bull market in commodities and the TSX (Toronto Stock Exchange).
Happy Trading,
Chris Vermeulen
Another way to look at this info is through the USO United States Oil Fund. This tracks much closer to the price of oil. The only issue is that many ETFs that “try to track” an underlying commodity is in how the funds are built. They own multiple contracts further into the future which does not exactly provide us with the short term news/event driven price movements in the current front month contract as they should.
What does this mumbo jumbo mean? Well, it means funds like USO and the highly respected UNG, and VIX ETFs… (just joking about the highly respected part), fail to track the underlying commodity or index very well when it comes to short term price movements. This means, you can nail the timing of a trade, and the commodity or index will move in your favor, yet your fund loses money, or goes nowhere...
Let’s Focus on the Technicals Now….
WTI crude oil has formed a bullish ascending triangle pattern from March to May of this year. The breakout to the upside is bullish and should be traded that way until the chart says otherwise. This breakout and first pullback must hold, or I will consider it a failed breakout. So if price dips and closes 2 days below the breakout level, it will be a major negative for oil in my opinion.
The range of the ascending triangle provides us with a measured move to the upside which is $112. Typically the first pullback after a breakout can be bought. The first short term target to scalp some gains would be $109, and at that point moving your stop to breakeven is a wise decision. Trading is all about managing capital and risk, if you don’t, then the market will take advantage of your lack in discipline.
Looking further back on the chart, you can see the double bottom formation also known as a “W” formation. Once the high of the “W” formation is broken the trend should be considered neural or up.
Also note that the RSI (relative strength) has been trending higher for some time now. This means money is rotating into this commodity. This is in line with my interview this week with Kerry Lutz and my recent article talking about the next bull market in commodities and the TSX (Toronto Stock Exchange).
WTI Crude Oil Trading Conclusion:
In short, oil has some extra risk around it. The recent move has been partly fueled by news overseas. So at any time oil could get a lift or take a hit by news that hits the wires. I tent to trade news related events with much less capital than I normally do because of this risk.
Happy Trading,
Chris Vermeulen
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