Tuesday, May 15, 2012

Oil: The Slippery Slope

Trend is your friend, especially in /cl

Here's the oil chart stopping at 12:30 pm when the correct short should have been made.

Oil looked good after the morning data but slowly started slipping back.  The big news was the Greeks causing the euro to plunge which is usually bad for oil.

Things were complicated with strong Market Signals.   XHB and IYT were strong along with AAPL.  But slowly, the markets kept slipping and most importantly,  oil and the oil sector was vastly underperforming the tech sector. 

 And one should always short the weakest markets. 

At 12:30 -- a clear trendline could be drawn and a safe short entered with an 8 tick stop.  This was over 80 ticks from the high of the day.  But it was the right thing to do.

 Had you kept moving your stop along the extended TL (drawn as the day moves on) -- you would have witnessed an epic drop for over 150 ticks. 

The Moving Avgs. on my chart help me identify the trend.  I want to see the 99 day MA under the 33 day when the TL is established. 

 The /tf also plummeted but a safe entry would have given about 90 ticks max - - and you'd have to be perfect.  So with the market starting to show weakness... always chooses the weakest chart to short.

 Hope today was not too painful for many holding longs.

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