Every Wednesday lately, I have put my entire focus on crude or CL. Inventory numbers are released at 10:30 EST and it causes reaction out of the market. I had short on the brain since that has been the trend lately. The above picture shows you the levels above. Although I did not label it on this chart, 43 was obvious support.
Lets take a look at the 5 minute chart. Granted I used a 15 minute chart for my entry but this tells a better story.
The numbers are released and crude rockets up 40 cents within seconds. It broke its 43.80 pivot but ran right into resistance above. It tried to flag above the pivot but the selling was too much. Once it got back under 43.80 I knew it was on. I took a short with a stop above 43.90ish. I had a 43.00 target. Amazingly, it knifed thru this area like butter. This is momentum. Had there been no news, I am sure 43 had a better chance to hold.
The reason why there was this big of a move, was a failed move higher, and MOMENTUM. The selling pressure was great because of news. I was predicting a move to $43. Momentum made it collapse even further. I hate to use the word predict, because that is not trading. Riding momentum is.
This reversal set up is my favorite thing to trade. Super low risk, and sometimes you hit a home run. These don't always happen, but it worked because of no support underneath 43 and additional momentum caused by a failed move.
Find the momentum, find your trade.
Hey Jake, nice post!
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