Tuesday, July 28, 2009

Oil trade update

Here's a quick update on Oil today with the markets being in a whipsaw tug of war battle, I decided to stay out of this fight unless a decisive victor comes out today. I wanted to point this out also because I wanted to say that TA is good in its place, but because it follows price primairly it sometimes doesn't get the whole picture. I hope everyone saw the post about a month ago where we broke down the oil trade and what TA was telling us about the direction Oil prices where going to go in the future, now this is TA at its best, in case you missed it here's is the post.


We said the pattern at that time was a reversal pattern and that Oil should come back down to test the lower trendline and ma support, and that are target after the breakdown was around $58. Well what did we get $58.72 to be exact and we bounced back up for a close yesterday of $68 and change! I hope someone out there took that trade:)

So even though TA patterns fail, like our head and shoulders on the SPX, overall it is a tool every trader should be well schooled in. We should be studying price movements and where they potentially should reverse. But TA alone is not sufficient, it would of had you shorting this entire rally, and without proper risk management some damage would have been done. No I am saying look for the potential movements and study volume and supply and demand patterns and order flow to see if they confirm the TA analysis, if volume analysis is telling you that a stock is getting accumulated heavily by large institutional players I don't care what TA tells you, do not go short or you will be sorry. Let's think outside the box and not look for those things that everyone else is looking at and create our own plan of attack!

EDIT: TA = Technical Analysis:)