Today’s trade was an Oil Feb. contract with a sell order from a price of 51.25. The price had been moving in a sideways channel for the last two hours after it had come back down to test the Moving Average blue line and Moving Average red line.
The yellow circled red bar is our sell signal as it has a tall topside wick, closed near its low and is reversing the mini-trend of the seven consecutive green bars that rose at a 45 degree angle as denoted by the small yellow line. The overall trend has also recently changed to a downward trend with the Moving Average blue line crossing under the Moving Average red line as denoted by the Yellow X.
Additionally, the price had twice tested the support level of the major support/resistance level of the white line at a price of 51.00, as denoted by the two small yellow circles, so the price should test that level again. Once the price did manage to reach that level, the bars all closed red so we would want to stay in the trade as there is a good chance that the price move could continue downward.
Then when the price did finally break downward we would now look for the price to reach the next obvious price target of the major support/resistance level of the white line at a price of 50.50. Once that level is reached, there was now a green bar with a long downside wick, showing us that the price tried to move lower but could not hold that price and was pushed back up above the major support level.
That signal, along with the time nearing 12:00 pm PST, which is getting close to the closing time, tells us that it is probably a good time to exit the trade at that major support level. Otherwise, we would exit a little higher when the high of that green bar was broken, or if we had used the Parabolic SAR green triangles as our trailing stop loss, then we would exit the trade in the last yellow oval for a bit smaller profit.
With an exit at 50.50, that would give us a profit of $750.