Tuesday  3 November 2009

Crude presented a low risk entry this morning.  We have already addressed the Crude Oil market as
having had a classical breakout from a trading range, Crude Oil - Picture Perfect Breakout, from the
19th of October.  After exiting long positions at 80.80, we were looking for a place to buy back the
position.  That topic was covered a few days ago,  Crude Oil - In A Pull-Back Mode.  It showed how Dec
Crude Oil traded under 77.00 a few times, and we allowed a possible pullback from that current level to
as low as 74.00.  Bear in mind, the stronger a market, the less a price pullback.

The 120 minute chart below shows how a trading range developed.  One of our rules is to buy in the
bottom 25% of a trading range, or sell in the top 25% if a trade is warranted, depending on the trend.
Crude Oil is in an uptrend, so sights are set ONLY on buying.

You can see from the chart, with the bottom 25% area delineated, Crude made another probe this morning
just under 76.80, and it held.  We used a smaller time frame chart to confirm the low and then enter long
on a rally, [buy strength].  If the analysis proves out, this will give us an edge, buying back 355 tics lower
from the 80.80 sell back on the 23rd, Crude Oil - Standing Aside.

Developing market activity will be monitored to determine if this will be a short term trade within the
trading range shown, or if market activity shows strength, it may turn into a hold for a potential breakout
from this trading range.

This illustrates how to use present tense market activity, coupled with past tense price history, blended
with the prevailing trend to take advantage of a trade opportunity.  We cannot know how the trade will
turn out, but by using this caliber of a selection process, and acquiring an edge, the numbers weigh
heavily in our favor.

Long CLZ at 77.25.                                            [Of course, we ALWAYS use a protective stop.]