After Large Range Days We Use Price Action to See What is Next.

After Large Range Days We Use Price Action to See What is Next.

We saw an increase in volatility in a lot of markets this past week. Many instruments saw large range days.

Corn

One of them was Corn. As was suggested last week Corn fell down and reached its target. The problem is that it didn't give a good entry signal so no position for me. Hope you did better than me here.

Corn is closely following the seasonal pattern (you can see it in the last week's post). That is why I am expecting buying opportunities to show up. But after this large range day from Friday, it is too early to take any actions. Keeping this on the front burner.

Energy Futures

Last week I've tried a long position in RB Gasoline but that large range day from Wednesday took out my stop-loss. 

This week my short-term COT setup appeared in Heating Oil suggesting a possible move to the upside. Crude Oil looks stronger than Heating Oil. It is also better accumulated. On the chart below you can see stopping volume and On Balance Volume (green line) which closely follows the chart 

Crude Oil futures analysis 01/12/2020

Seasonally, starting around the end of January, beginning of February we are entering a strong period for the energies. This is shown with a blue line.

After such a large range day we can expect some basing around these levels. That I think will present some very good buy signals.

British pound

Another instrument where I'll be looking for long signals is the British Pound. 

British Pound Futures analysis 01/12/2020

We are in an area of a seasonal bottom. Also, there are signs which suggest that the British Pound is being accumulated.

From price action perspective last bars are showing a pause before continuation of the down move. Such pause periods are vulnerable to failure. This means that if the market breaks above Thursday's high we should see a good move up towards the last high (12/31/19), followed by the unfilled gap from 12/17/19.

Breaking below Thursday's low invalidates this scenario.

US Stock Market

In the last week commentary, I've discussed the possibility of going short Russell 2000 or long Dow. 

Following the events, after that blog post, I am now long S&P500 futures. I've switched to S&P in the last moment because it, along with NASDAQ were holding the best during the downfall from Wednesday.

S&P500 Futures analysis 01/12/2020

My entry is not something you'll see in the books as a perfect entry :) Because the initial stop is quite long. I expect a pullback/range here where If I have the opportunity will add more contracts to the position. Targets are 3300 and 3330.


Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading



Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer

Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com

TAGS: S&P500, SPX, Corn, Spy, Real Trades, Crude Oil, British Pound, Heating Oil

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