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Correction of five consecutive down days ending with the largest one, stopping volume and a seasonal bottom is what can be expected to create upside opportunity for Crude Oil. If the market can make a higher short-term low that would be the place to search for entries.
Take a look at the next charts. First is the Canadian Dollar.
Next is the U.S. Dollar Index
And the Japanese Yen
Do you notice something very strange in those three charts? Like Crude Oil, they all show that currencies are either around tops or bottoms, seasonally speaking but there is another not very common similarity. I am talking about Commercial's activity. Check the blue line in the pane below the chart. See the big jump shown by the latest COT data? That is well described in piece #M20 and with 70% suggests that a move should be expected in the direction of this Commercial push.
How to approach this situation? Well, generally we should wait for price action signals in that direction but there is no sense in taking positions in all of them because buying currencies and selling Dollar Index is the same trade. Since Crude Oil is also expected to go up and the only pro-trend trade is in the Canadian Dollar this is where my preference goes.
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
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