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Silver - Crude Oil - Making A Trade. Decision-Making Process

Tuesday Evening  18 January 2011

 In looking for trade potentials, different time frames are always
considered, from daily to intra day.  There were two potential
short-term set ups, one in silver, the other in crude oil.  We
often say that once a trade is entered, the outcome can never
be known.  By that, we mean will there be immediate positive
follow-through, will it be labored, or will it turn into a loss, among
an infinite number of possibilities.  All anyone can do is follow
one's rules and execute when a signal is given.

 Crude oil is in an uptrend, but a labored one, and at an area of
previous resistance.  We have noted a series of failed probes
that lead to rallies.  They typically are retested.  Yet the first one
does not show a retest.  In point of fact, that first failed probe was
a retest itself of a previous probe not shown.  The purpose of
showing them on the daily is because we spotted one on an intra
day chart, next.

 

 CLH D 18 Jan 11

 The sharp early morning break, at the second "p," created
another failed probe.  Expecting a retest, a buy order was entered
at 90.70.  It was not filled because there was no retest.  In a
labored-type up trend, one would expect retests.  Not this time. 
Price shot up, uncorrected, and this was a missed trade opportunity. 
This was a potential coming from a break.

 Now we will compare another potential opportunity from silver, in
a stronger trend, following...

 CLH 10m 18 Jan 11

 Not only can we contrast a trade potential with crude oil, above,
we will also reference a similar trade set up in silver.  This daily
chart may be familiar, for it is an update from a previous silver
trade, [See Silver - Turning Point Confirmed, click on
http://bit.ly/gvyfeE, second chart.]  Silver has not yet regained the
trend line, but what is more important is the horizontal support
which we identify as an Axis Line.  An Axis Line is one that acts
as both resistance and support.

 You can see, after the initial spike rally in early November, the
retest rally was around $28, and there was a second failed retest
again later in November at $28.  By the end of that month, and
into December, price rallied above $28, and it has acted as
support, since.  Many technical analysts use and rely on
traditional sloping trendlines, but they are not as reliable and are
subject to change.  Horizontal lines, on the other hand, provide
more reliable information, as the $28 area has been
demonstrating.
 
 The overnight holiday trade saw silver retest just above $28 and
begin another rally.

 SIH D 18 Jan 11

 What we know about the hourly trend is that is has been down
and could be nearing a turning point.  We showed such a
successful turning point in the last silver signal.  Click on the
above link, again, and see the first chart.  We needed to see
silver break above the supply TL, shown below.  We use a
smaller time frame to enter trades, getting a better signal. 

 We saw such a signal when silver continued its rally and
reached and closed above the supply TL on strong volume. No
situation is ever the same because the participants are different. 
The previous signal worked almost immediately on the last turn
of the hourly trend.  This one did not follow-through immediately. 
Not encouraging, once we were long from 29.02 on the breakout.

  This time, price went back under the breakout point, but it never
did gain any momentum to the down side.  From the rally that
began at $28, lower left on the chart below, silver rallied over $1. 
Well, the trend is up, and take note of how price developed after
entry.  It went sideways, consolidating, instead of correcting lower,
No, price held the previous recent developing support just above
28.70.  A consolidation instead of a correction is a sign of strength. 
In fact, scroll back to the daily chart above, and you will see the
same thing.

 Rather than  correct to a half-way point, which is still a show of
strength in a market's ability to hold that level, the daily chart is
moving sideways, consolidating gains.  This can be a "resting
spell" that leads to the next leg up.  This remains to be seen,
here, but that is the way developing market activity is showing,
at least for now, and all we, or anyone can base a decision on
is what is known.

 Silver is in a stronger trend than crude oil, but the crude oil trade
signal was far stronger in intra day results than was silver, which
closed lower...still within positive activity, but lower nonetheless. 
We missed a good potential in crude and ended with a temporary
losing position with the silver trade made.

 How are they faring after hours?

 SIH 10m 18 Jan 11

 The market is holding, but the day's high has not yet been
exceeded, in crude oil.

 CLH 10m 2 18 Jan 11

 Silver has been able to rally above its intra day high, and one
might expect it due to silver being a stronger trend.  We are
getting more confirmation that the hourly trend has turned back
up, for now, and as with the last trade, we get to monitor the
position, looking for ending action.

SIH 10m 2 18 Jan 11