Hey everyone, Joshua Martinez here with tradersagency.com and welcome to this week’s idea. Behind us we have Light Crude Oil with an 800 tick potential buying opportunity, or getting ready to provide us a buying opportunity. Now, every tick is worth about $10 with E-Mini contracts. This is nearly worth an 8,000 U.S. dollars potential on the return on the investment with Q… Oh, sorry. With CL as the contractor.
There is an E-mini on this called QM. Double check the tick size, I believe this is going to be a little bit less and a tick count a little bit bigger. But let’s focus in on Light Crude Oil. Okay, so this is Light Crude Oil Futures monthly timeframe. We like to use the monthly timeframe for direction. Now, I’m a big believer in, if you can’t identify direction, you realistically should not be trading.
Take Direction Over Next Month
Now I’m not talking about direction for like the next hour. I’m referring to the direction over the next month and longer-term direction. What I like to do is look at a symbol and say, “Okay, this is the next big move.” And if I can’t do that, I don’t really like trading the symbol because ultimately it really doesn’t give me confidence to hold a position. And usually when you want to hold a trade, you need some confidence. Now, traditionally, the market does the same things at, on and around the same price points. So one of the things that we can do here is we can monitor and we can view how Light Crude Oil on a monthly timeframe has been forming lows at, on, and around this bottom blue level. Now you’re going to notice this bottom blue level history has been around for quite a while, actually since 2004. So it’s about a 16 plus year support pattern.
Draw your trend lines forward to back
Now the market forms low on the bottom, more than likely it’s going to form lows on top. Now, most people that I’ve seen, they draw their trend lines from back to forward. I like to draw my trend lines forward to back. And the reason why is I find that you can do a better job at finding the U-turns and ultimately that’s our job is to find these U-turn areas because if you begin to view markets begin to U-turn at, on, and around the same price points.
So ultimately for me, that’s very important for me. So there is a high price market falls. There’s a high price, market falls. There’s a high price, market falls. And ultimately what we have here is we have somewhat of a pattern. Right? And so right now the market is moving from the bottom blue level to the top blue level, but there are going to be areas where the market’s going to naturally hesitate, the market’s going to naturally wave.
And so just like how the market forms lows on the bottom blue level, form highs on the top blue level, what we want to do is you want to just make sure that before we buy the market, we’re just looking left. And looking left is as simple as the way it sounds. It’s just look left and ask the question, is there history of the market forming highs and lows at, on, and or around the same price point?
And when I looked left, one of the things which I’ve noticed is that right around $42, starting from July 2016, we have a U-turn, a U-turn, a U-turn, a U-turn. So we have all these lows that formed right around $42. And we’re right underneath that mark. So realistically, this market should hesitate a little bit and this isn’t a candle sticks. They may even dip down bearish a little bit more. May come all the way back down, who knows.
But what I’m saying is where the market begins a U-turn, that’s going to act as resistance. And normally what you don’t want to do is you don’t want to buy just below it. So when we say don’t buy future high prices, this is exactly what we’re referring to.
You have a U-turn
Now, if this market can close above this pink line, usually it’s just like a daily timeframe, quarter daily timeframe. If it closes above the pink line of $42, more than likely, it’s going to head towards $50. Now, $50 you’re going to notice this pink line. You have a U-turn, a U-turn, U-turn, U-turn, U-turn.
So there’s really nothing that’s going to prevent the market from really going up that I see, according to the research, that’s going to prevent the market from going $42 to $50, which is an 800 tick move, which is an $8,000 buying opportunity with one E-mini contract.
Now what’s neat about this is we don’t need to buy the market now, we just have to wait for the market to get above $42. And this week’s idea, it’s try to find where the market U-turns. Right? Just like how we formed our lows and our resistance, our highs, and then also look left.
And usually when the market closes above or below major U-turn you get some follow-through, that’s all we’re doing here. You can go to a smaller timeframe, a daily timeframe, every one hour timeframe, five minute timeframe, apply your favorite entry strategy from $42 to $50 once. Or if this market closes above $42.
