Ascending Wedge Short?
Updated
Full discIosure: I identified this wedge through the recent idea posted by TNTSunrise
I do believe oil is still bullish, but it seems to have hit a big resistance in the $50-51 area. I am placing a trade to enter after for the breakdown pullback, ideally somewhere on this rising support line.
I have two options for stop-losses:
The first is placed above the (potentially) bearish pinbar which made a new higher high at 50.37 (this is why I am wary to short here and place stop loss above it -- because of the higher-high)
2nd option for stop loss is above the resistance high and the previous high before this recent run....stop loss somewhere around 50.95 I feel is safer, but requires more risk.
If I had to choose it would be the second option which requires more risk but I think the extra risk greatly improves the chances of this trade being successful. Or even better, I would watch price action whenever price approaches the stop-loss area.
My target price is an equivalent measured move to the vertical distance of the wedge when the wedge "began" (around 03/21-22/2016). The beginning of this measured move would begin after the breakout of the wedge. I would plan to take profit a few cents above this price.
Other locations to take profit could be the .618 and/or .5 Fib Retracement from the beginning of the wedge to the current high.
Good luck to me!
I do believe oil is still bullish, but it seems to have hit a big resistance in the $50-51 area. I am placing a trade to enter after for the breakdown pullback, ideally somewhere on this rising support line.
I have two options for stop-losses:
The first is placed above the (potentially) bearish pinbar which made a new higher high at 50.37 (this is why I am wary to short here and place stop loss above it -- because of the higher-high)
2nd option for stop loss is above the resistance high and the previous high before this recent run....stop loss somewhere around 50.95 I feel is safer, but requires more risk.
If I had to choose it would be the second option which requires more risk but I think the extra risk greatly improves the chances of this trade being successful. Or even better, I would watch price action whenever price approaches the stop-loss area.
My target price is an equivalent measured move to the vertical distance of the wedge when the wedge "began" (around 03/21-22/2016). The beginning of this measured move would begin after the breakout of the wedge. I would plan to take profit a few cents above this price.
Other locations to take profit could be the .618 and/or .5 Fib Retracement from the beginning of the wedge to the current high.
Good luck to me!
Note
Posted Stop/Loss was still hit...unfortunately I am still in my position. This was dumb. I stayed with the trade because I did not want to give up my 2 contract short (with taking the loss I would only be able to re-short with 1 contract) but this should have not had any influence on the decision to close this trade at the stop loss.
I will learn from this.
For now I am still holding short, with the same price targets.
New *strict* stop loss is 51.55
Note
This was a bad week for my shorts. After a 150% gain in my portfolio, I was dealt my first big loss. I overleveraged myself and was in four positions. The margin of these four positions left with me with barely any balance (literally barely any ballance -- $~100 or so dollars) to support the position through some down time. Unfortunately this led to a margin call which resulted in giving back half of my previous profits and selling off one crude contract and one gold contract. Overall though I am happy to see the break of this wedge to the downside on the daily chart. I will continue to work on both my technical analysis and money management skills!
Note
In Murphy I have read a Three Moving Averages to use in futures are the 4, 9 and 18 days. I also know from previous research that the 21 DMA has been very reliable in the past. So it will be wise to incorporate both of these strategies (perhaps separately, and to confirm each other) in the futureNote
Possible support levels to watch out for: 48.65
47.75 - 47.95
47-47.14
~45.60
44.60
44
42.50-43.50
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