Crude Oil at the Key 100 Level Intraday
Keeping with the simplicity theme, it’s often very informative to watch price as it interacts (tests) a critical “psychological” technical level – for example, $100 for Crude Oil.
Let’s take a look at the current and past “power plays” crude oil has made at this key Bull/Bear Battle-Zone:
Technical Analysis (charting) doesn’t have to be complicated – particularly for the short-term trader.
As price interacts with a critical, well-known reference level, you can play moves AWAY from the level (breakouts) or fades/tests of the level (rejections).
We never know if a level will hold – and in fact, this sort of choppy mess is typical as buyers and sellers battle for ‘control’ or positioning at a key inflection point.
It’s like a big game of Chicken – who’s going to make the first move? Who’s going to retreat? Who has more confidence?
If you have very quick intraday trading experience/reflexes, you can try to benefit from these quick battles/games.
While this is a 30-min chart, you can drop it down to a 5-min chart and pay attention to momentum or any sort of lower timeframe signal that sets up at the key $100 level.
For example, there were good moves that came as price moved away – in both directions – from $100. Play little intraday trendline breaks accordingly with a tight stop on the opposite side of the line.
You won’t win on every trade, but the losses will be small compared to the knee-jerk price moves – some of which were $1.00 to $3.00 moves up/down from $100.
Trading the crude oil futures, that’s about $1,000 to $3,000 per contract (per move).
And once one side clearly wins – perhaps it’s the bulls given today’s action – we can expect a departure from this level for a swing or more aggressive intraday trading style.
In other words, while buyers and sellers play cat-and-mouse, once price moves far enough away from the inflection level, then the bears (as we move higher) stop shorting and start BUYING-back contracts to cover losses, which emboldens sidelined buyers/bulls to step-in and buy the supposedly confirmed breakout.
Such logic is what creates/ignites breakouts and feedback loops.
Anyway, it’s a fun chart worth studying in more detail – particularly on the lower/intraday frames as price danced around $100 per barrel.
Corey Rosenbloom, CMT
Afraid to Trade.com
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Very interesting. Looks like there were some good opportunities to play the breakout above 100.