Today’s trade is an Oil Sept. contract and we need to be watching both the 5min and the 1min charts. From looking at the 5min chart above we see that the trend is down (blue Moving Average line below red line) and that the 69.00 level was acting as a resistance forming two tops earlier, as well as two support at 68.50. Next we need to take a closer look at the price by checking out the 1min chart below.
Now we can see that the price tried to test the 69.00 level, before giving us a sell signal with the circled red bar from a price of 68.86. If we look at the previous bars, we see that they followed a pattern of alternating consecutive green bars, then red bars. The last three green bars that tried to test the resistance at 69.00 formed a steeper angle in the pattern as it moved away from the Parabolic SAR red triangles. So after we enter the market, our first target is to have the price return to the Parabolic SAR for a modest gain of $100. From this point we would want to see the SAR broken with a bar closing below that level and thus changing the SAR to green triangles above the price. Now we can move our stop loss below our entry price to make sure to lock in some profit as we wait while the price moves sideways through the purple channel. As the price and the green SAR come closer together, we would move our stop loss just above that point until we finally get the big drop we had been hoping for, down to test the previous support of 68.50 that we saw in the 5min chart. As the price broke through that level, we would now move our stop loss to the top of each bar as it closes to lock in more profit and as you can see the price never moved above the high of a previous bar until it fell below the support level of 68.00. At that point, we either are stopped out at 67.97 or when the green SAR is broken at 68.08 for a very nice profit of $780 to $890.