Mr_Dent

Crude painting textbook bull Flag on hourly chart

Long
NYMEX:CL1!   Light Crude Oil Futures
4
Crude has been performing as anticipated over the past few days - The stars were aligning for this rally with Seasonals, Extreme Producer Merchant buying activity, Wave Formation Symmetry, and wickedly oversold technical conditions all converging to the same conclusion. I call this a state of "Unity" and it's when we have the highest odds of a successful campaign. (please see prior write-up for full analysis)

Our first 2 long trades are working and now we are seeing a third opportunity. Crude has a textbook flag on the hourly bar chart, and as you can see on the daily chart next to it there is lots of room for oil to run, even if the bears are correct & we stay in the current downtrend channel .

Aggressive traders can add on a breakout of the flag @ 44.30 or you can wait for a breakout to new highs @ 44.50. Expect minor resistance @ round number 45 as this is the 23% FIB retrace level of the 5 wave down.. Bears will view this as a shorting area, but when proven wrong, they're fresh shorting will prove to be the fuel to take us to the $47 range at the 38% FIB Level.

CAUTION PLEASE! - Tomm is the EIA numbers and this is where the banksters and algos come out to play to simultaneously terrify both longs and shorts with wild/violent whipsaw trading.

I'd suggest waiting until after the report is released to watch & let the intra-day range be established by the machines. If you must get in before, use options to express the view or to hedge. When you are winning and seemingly have the proverbial tiger by the tail as has been the case here, this is when you tend to get over confident and that leads to sloppiness in your place betting. Be on guard for this. Don't get sloppy and don't bet greedily!!

How to Trade it:

1) Sell the July 42Put for .41 - Delta is .22 currently
2) Buy the 44.50 call for $1.10 - Delta is .48 currently. This should be a net DR of .69

If we are wrong & crude starts falling down, then cover on hourly close below $43 - In this scenario you'd lose approx $300 on the put and $600 on the call = $900 max risk
Your upside target is open but we'll use $46 for this trade leg. If we get there implement leg 3:

3) Sell a call 50 cents out of the money - You should be able to get around 90cents for this.

This would then put your gain at $2 on the 44.50 call + the additional 90 cent premium on leg3 - Minus inital cost of .69 = $2.20 gain or 2.5 -1 R/R.

I'll update trade economics after the 10.30 release.

Good Trading to All



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