Sometimes, trading is more about the trades that you don’t take than those that you do. I have told myself that many times over the last few weeks when it comes to crude futures. Back on March 18th, I wrote in these pages that I expected to see the volatility that was around at that time continue, but over time, a bearish bias began to emerge as high oil prices proved to be the best cure for high oil prices. That worked out pretty well. Crude did indeed jump around for a week or so after I wrote it, then began to drop, following a Presidentially ordered release from the Strategic Petroleum Reserve and declarations of intent to up output from integrated and E&P companies in the U.S.
From a trading perspective, however, getting that call right didn’t help. The moves over the last three weeks have been driven by headlines rather than observable fundamentals, making it impossible to predict what would come next, while also negating the value of any chart analysis. Price doesn’t react to lines and squiggles on a chart when it is being driven by how a war is going and by the prospects for that war escalating.
So, while I have been watching crude closely, I have been doing basically nothing from a swing trading perspective…until now.
What we have lacked to this point but have right now is a classic chart setup that allows for a trade that can benefit from movement in either direction or, at least, can be set up to make covering…