Third Friday of the Month: Hectic As Usual on the Oil Market

[MichelGJulien 10]

If the overnight session was a real snoozer, the pit session was its complete opposite. The third Friday of the month (futures contracts rollover, options expiration, etc...) is always a minefield for traders. And today was no exception. My forecast from yesterday that price should probably go down to the 20 SMA level at 105.89 didn't even come close. The lowest the price went was 106.56, a level quickly (and strongly I should add) rejected by traders. The roller coaster ride started at 9:55 when a bad consumer confidence number produced a huge spike to the upside. Tough luck for me, I had opened a short position not even 10 minutes before the release. I really didn't see that one coming, but I should have (always check your economic events calendar, folks).

 

A strong close today could lead to a new high on Monday

 

After the big spike, price went as high as 108.17 before starting to retrace, slowly at first, then a little faster. That prompted me to tweet: "For some reasons, this break of the 108 level has not convinced me yet of its sustainability". Three minutes later crude oil dropped $1 a barrel. I told you, hectic. Now about technical: the market opened at 107.43 right in the middle of yesterday's range and value area. An hour into the pit session, the initial balance came in at 75 ticks, i.e. 10% below its 10-day average. Nothing unusual here that could have led to believe that the market would become after that a real nuthouse for the rest of the day. Thanks God we only have one Friday like that every month. For what is more likely to happen Monday, my crystal ball is pretty foggy right now. My "feeling" is that the uptrend is not over yet, but a little correction before a new high is reached wouldn't surprise me and would even be "healthy". Wait and see.

 

I took 3 trades today:

 

1. Short 107.34 at 9:46, exit 107.74 at 9:53 for a -40 ticks loss.

2. Long 107.74 at 9:53, exit 107.74 at 10:25 for a breakeven trade.

3. Long 107.94 at 11:01, exit 108.04 at 11:18 for a +10 ticks profit. Results: -30 ticks today, +96 ticks this week.

 

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[Qiman 10]

Thank you for taking the time to share this interesting material, as I have time I will be looking back over your blog archives to winnow out additional insights from your experiences and point of view. Typically how many CL contracts do you trade under conditions of average volatility? For many traders, one is more than enough!

[MichelGJulien 10]

  Qiman said:

Thank you for taking the time to share this interesting material, as I have time I will be looking back over your blog archives to winnow out additional insights from your experiences and point of view. Typically how many CL contracts do you trade under conditions of average volatility? For many traders, one is more than enough!

 

Thank you! I trade 1 contract normally, but sometimes I go up to 3. It all depends on my degree of conviction about the market direction.

Michel G Julien

[Qiman 10]

  MichelGJulien said:

Thank you! I trade 1 contract normally, but sometimes I go up to 3. It all depends on my degree of conviction about the market direction.

Michel G Julien

 

You are most welcome! Have you ever found QM to be of use in certain market conditions, say when conviction is lower regarding WTI, but the spread in QM is not ridiculous? I am going to be experimenting around with using both CL and QM, depending on conviction, volatility, spread, etc. While it doesn't lend itself well to scalping, perhaps I will use it for some conditions where I might be looking for a 30 + point move in CL.

 

When you are using just one CL contract, with your market profile approach, what have you been able to average in terms of ticks per day or week over the long haul? And what kind of margin per contract do you tend to use? I personally think that CL is way too volatile for day trading margins, except under rare conditions.

[MichelGJulien 10]

  Qiman said:

You are most welcome! Have you ever found QM to be of use in certain market conditions, say when conviction is lower regarding WTI, but the spread in QM is not ridiculous? I am going to be experimenting around with using both CL and QM, depending on conviction, volatility, spread, etc. While it doesn't lend itself well to scalping, perhaps I will use it for some conditions where I might be looking for a 30 + point move in CL.

 

When you are using just one CL contract, with your market profile approach, what have you been able to average in terms of ticks per day or week over the long haul? And what kind of margin per contract do you tend to use? I personally think that CL is way too volatile for day trading margins, except under rare conditions.

 

Yes QM could be interesting for medium term position depending on account size and not scalping as you rightly said. All my results are posted every trading day on my blog.