Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Market Timing Crude Oil

Figure # 4.4 - In Figure # 2.10, I made a Time projection for the March Crude. Now it is time to add another dimension to that chart. As soon as the high pivot point was confirmed at (D), I drew the Action line. Beginning at the low of (C), I drew a line to the high at (D). This gave me the Action line. Using the Andrews Pitchfork function of my charting software, I clicked on the high at (B), and then clicked on the lowest low of the pivot at (C) followed by the highest high at (D). This function drew a line through the center of the (C) to (D) Reaction swing and divided the Action segment of the cycle from the Reaction segment of the cycle. The center line became the first price objective. Alan Andrews states in his course that the futures market will reach the center line 80% of the time. I have found this statement to be very close to correct and very helpful in my futures market timing analysis. I have also made some of my own observations about the center line and put them to use in the trading rules I am about to illustrate.

The next step was to do the reverse/forward count, just as I did when projecting future swing trade dates using the TR pattern. The reverse count from (C) back to (A) equaled 13 price bars. The forward count of 13 price bars from (D) projected out to February 16.  I located February 16 on the chart and marked this date on the center line. At the spot I marked on the center line, I drew a line parallel to the Action line. This is called the Reaction line or Target line and gave me a price objective to go along with the Time projections. In other words, if everything plays out as it should, I can expect the futures market to reach this line on or before the projected Reversal date.

I consider the price level where the reaction line crosses the center line as the primary price objective. This means the price objective of the short position in the March Crude oil was 58.65. Since the trigger price to enter the short position was 67.20, I anticipated the Crude oil to fall to 58.65 within the next 13 days. The Crude oil will either reach the Reaction line or run out of time; either way, I know in advance when the futures market timing is due to lose momentum and it is no longer advantageous to stay in the trade. That information is invaluable to a trader!

Crude oil reached the Reaction line on February 15—one day before the February 16 swing trade date—where it posted a low of 57.60 before bouncing back to 58.46 on the February 16. In this case, the futures market pushed past the projected price to reach the Reaction line early; either way, the futures market timing did exactly what the swing trade date Indicator had suggested.

crude oil
 Figure # 4.4 – March 2006 Crude oil

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**THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES.

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