Today’s trade was an Oil Jan. contract with a buy order from a price of 50.50. The price had been moving in a downwards trend back and forth between major support/resistance levels of the white lines at a price of 51.50 to 50.50, then to 51.00 and almost to 50.00.
The yellow circled red bar was the first opportunity to enter the market as that bar is reversing the mini-trend of the previous six bars that moved from one major support/resistance level of the white line at a price of 50.50 to the next at 51.00. That bar also had the Moving Average blue line separating from the red line and the Parabolic SAR green triangles above the price to signal a downward move. That bar had a long downside wick and that doesn’t signal a downward trend so we might have missed taking that trade even though is still worked for a 75 point move.
The yellow circled green bar that closed near its high is a better signal as it is reversing five consecutive red bars and its high is just above the major support level of the white line at a price of 50.50. We would place a buy stop order just above that bar at a price of 50.50 to long the market.
Once in the trade we would look for an immediate price target of the major support/resistance level of the white line at a price of 51.00 that the price had recently reached. When that level was broken and the price shot up towards the next major support level of the white line at a price of 51.50 we would want to make sure that we moved our stop loss order up to the 51.00 level at least in order to lock in profit.
The next bar was a large red bar that came back 75 points from its high so during that bar we would want to be looking at the one minute chart in order to move our stop loss order up higher so as not to lose all that profit when the bar came all the way back down to where it closed.
That would give us a profit of at least $500 and possibly up to $900.