and The Candlestick Forum
After the big move on Friday, bringing the Dow and the S&P up through the 200 day moving average, today’s consolidation is not unexpected. The Dow appears to be using the 200 day moving average as support while the S&P 500 is trying to come back up through that level. Pay attention to the numerous J hook patterns in progress. Stay predominately long until there is a true reversal signal.
The indexes, although trading fairly in decisively to the upside today, continue to demonstrate bullish sentiment by remaining above the T-line. The Dow and the S&P 500 should be targeting the 200 day moving average. The NASDAQ is forming a small scoop/J hook pattern, supporting off the T-line. The uptrend remains in progress until there is actually a close below the T-line.
Would you mind paying more for gas at the pump, if you were able to make massive profits in Oil related trades? If we play this right, not only can we buy all the gas we want, we might just be looking at a brand new car!
In my last update, a few days ago, I said that if Crude Oil futures went up through $37.09 with some good momentum, then that would be a clear signal that the recovery in Oil was underway.
Well, it happened and I stand by my analysis. I think the Oil recovery is a go.
There are several ways to trade the recovery in Oil. Of course, you can just go long on the futures contract, but that takes a pretty large account to hold contracts overnight and beyond. And it carries more risk. I am trading Oil with stocks and ETF’s.
WLL (Whiting Petro) is an Oil related stock that I like a lot. It is low priced but trades with really big volume. I’m looking at an entry of $8.57, with an initial stop of $3.33. If WLL moves with Oil, as it has done so far, we could be looking at a 2X or 3X trade in a relatively short timeframe. Works for me!
If you don’t like low priced stocks, USO (Crude Oil ETF) might another way to play this. I’m looking at an entry of $10.25, with an initial stop of $8.13. USO has huge volume and a very active option market as well. Whatever option strategy you like for a bullish trend play should do really well.
I’ll continue to provide updates a few times a week. I’ll update the price pattern on Oil Futures, the two trades that I called out here, and I’ll add a few more plays as this works its way out.
Stay tuned…
The markets remain in a consolidation stage. The T-line continues to be a relevant factor as far as support. Until there is an actual close below the T-line, consider the uptrend still in progress, albeit relatively sideways. Have both long and short positions in the portfolio.
Is this the market reversal? Note that there has been no reversal signals in the indexes, merely a selling day/profit-taking during an uptrend. As demonstrated in the past four days of the uptrend, the selling has occurred in the early morning trading, followed by buying going into the latter part of the day. Numerous uptrend in stocks are selling off this morning but without candlestick reversal signals. Numerous stocks have already pulled back and tested the T-line. The prudent strategy is to do nothing until the markets indicate what will be happening at the end of the day. Be patient.
The study market trend continues its current characteristics, selling off early in the day with buyers coming back in after the initial selling. Crude oil prices are now moving back up and gold is waffling to the upside. Continue to stay predominately long with the expectation the 200 day moving average is the target for the indexes.
It’s no secret that Oil has been in a massive decline. From over $120 per barrel in 2012 to less than $30 in 2016.
The big question is, “what’s next?” Will Oil continue down or will it head up? If we can correctly call the correction in Oil, we can get some REALLY profitable trades! But if we jump in too soon and are wrong, we lose.
Some simple technical analysis can give us the answer. We don’t have to load our charts up with too many whizzy indicators to read this one. Simple Dow Theory, with a simple Elliott Wave count can give us the answer.
Recall what Dow theory says; “a down trend is defined by Lower Lows and Lower Highs.” We’ve seen that for a long time on Oil. When that pattern is broken, when we take out a Lower High and put in a Higher High, that means something, it usually signals a change in trend, or at least the beginning of a corrective movement.
Elliot wave says that price moves in a series of impulsive and corrective waves. Elliotitians can argue all day long about the specifics of wave counts, but there is no debate that Oil has been in an impulsive Bearish wave for some time now. At some point, we will get a corrective wave up. Dow theory can signal when that is happening.
When (not if!) the corrective wave begins, then the current Fibonacci range for that is 38.2% – 61.8%, or $62.97 – $84.87 on the Crude Futures Contract. That is a massive move from current prices and there will be some REALLY good trades in Oil Futures, ETF’s and Oil related stocks.
Does this method of analysis work? Well, nothing is perfect…but using the same technique, we called the recovery in Gold. We said that when Gold futures crossed $1113, the recovery was on—and man is it! Oil could do the same thing. If it crosses $37.09 with authority and momentum (not just a few ticks,) then Oil is on as well.
We’ll provide regular updates as this plays out and if the recovery begins, we will call out some specific trades.
Stay tuned…
Although there isn’t any great movement in the market today, it is demonstrating that he is not selling off, keeping the uptrend intact. This is allowing the strong stocks to stay strong. Crude oil prices and gold prices have moved up strong, adding strength to those sectors.
Today’s consolidation is not unexpected after the big move yesterday. The uptrend remains in progress as long as there is not a sell signal and a close back below the T-line. The 200 day moving average remains the likely target for the Dow and the S&P 500. There are a few gaps to be filled in the NASDAQ up toward the 200 day moving average. Stay predominately long.
March 15th Daily Market Comments
Today’s selling remains in the characteristic of this uptrend, some selling in the morning with expected buying later in the day. This can be better confirmed by using the 10 min. chart on the Dow and the NASDAQ. The T-line becomes the important criteria on the 10 min. chart. Continue to stay predominately long until there is a definite reversal signal in the markets. However, the J-hook pattern produces the probabilities that the uptrend remains in progress, especially if the indexes do not close back below the T-line.