Crude Oil at the Key 100 Level Intraday

Mar 4, 2011: 2:57 PM CST

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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1 Comment

One Response to “Crude Oil at the Key 100 Level Intraday”

  1. Paul D Says:

    Very interesting. Looks like there were some good opportunities to play the breakout above 100.