I love trading. And let me tell you folks, WTI oil is a traders dream. I’ve already traded oil twice over the past 10 months-and things are looking up for a 3rd trade. Please bear in mind that oil is not an investors friend right now. There is no trend – it’s in a basing process. Either trade it – or avoid it. This game is not for the meek. Understand that there is plenty of risk on this trade, but also plenty of reward for those who trade with discipline. With that in mind, lets get right down to my current trading plan for energy
The chart below shows us support / resistance lines since 2009. They are playing out perfectly. Pay attention to them – you want to watch for a bounce off of those lines, in conjunction with the momentum indicators noted hooking up.
For your interest, there are many ways to trade oil – my instrument of choice is through the crude oil commodity ETF’s. I am not interested in energy equities. They are for investors–I am trading, not investing here. The other thing to note is that not all oil ETF’s are the same. Some mimick shorter termed futures contracts. USO (US) is one such ETF. Some trade off of longer contracts such as the Horizons winter contract ETF (HUC- TSX). USO will move quickly with oil prices. HUC will lag a bit. Because I’m in short termed trading mode, i have opted for USO as my instrument of choice. Here are the signals I am watching to enter oil:
A brief trading plan for oil
-Support off of $45 or $38 (those are approximate support prices–give yourself a dollar discrepancy around them)
-Bounce for minimum (!) 3 days and 3% price change off of those support levels
-Stochastics hook up
-RSI hook up
-MACD hook up
Trade out of the position upon a failure to break the resistance line above your entry point (wait 3 days upon a failure–or just sell if it hits resistance if you just wish to take your money and run). Resistance will be prior support points at: $45, $55, $62. These are approximate price levels to target AFTER a successful bounce off of the above noted support points.
Finally. if you buy at – say $46 or $47 (off of a bounce from $44-45), and that fails, wait 3 days for a break of $45 before selling. On day 4, if the price remains much below $45, sell. Expect a new support level of $38.
Thats about it folks. I’m watching this trade like a hawk. The above factors are what I am watching for. You can do the same. And remember, this trade is not for the meek and mild. There are plenty of moving parts at work in oil politics-factors that can ruin a good trade quickly. But that uncertainty has provided you and I with the potential for some profitable trading.
Be careful out there!