I'm Not Bearish Crude Oil, Yet I Now Prefer Scalping In The Bearish (DWTI) Over The Bullish (UWTI)

Jun. 12, 2015 2:48 AM ET1 Comment
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Contrarian daytrading technician who specializes in locating high probability short term trades while predicting price movement directions with over 85% accuracy. Most of my trading involves either extremely short term micro scalping of stocks or commodities (using 1 minute bar charts), or swing trading of stocks overnight. I also specialize in weekly stock option premium selling, along with pre-market and post-market psuedo market maker and stealth trading activity, and selling commodity option strangles (selling delta neutral pairs of far out-ot-the-money puts and calls), with the intent to achieve a steady 1% weekly return. After 32 years, well battle tested, very opportunitistic while putting capital preservation as tantamount. Rehabilitation Counselor over 20 years, M.S., M.B.A., now an around-the-clock speculator. Incorporate seasonals, time of day, and other patterns and methods where high probability price movement patterns can be statistically forecast. Know how to safely go long high beta, heavily shorted stocks; know how and when to use extremes in sentiment to take the other side. I like to fade extreme moves as my proprietary methods are based on reversion to the mean theory. Developed my own scale trading and money management techniques. Will change and adapt my trading style based on current market conditions. I hope to start a chatroom devoted to teaching speculators how to see and capture daytrading opportunities. They say that those who can...do, while those who can't....teach. I want to provide teaching from someone who really can do, someone who knows how to make steady returns while experiencing minimal drawdowns. As a mentor, I would love to share my knowledge and support to help small traders. I came from humble beginnings and have never forgotten it. I want to accelerate the learning curve of my chatroom students so they won't have to make all the mistakes that I have over the years. I am excellent at devising and implementing strategies that can quickly turn a losing trade into a net winner.

Crude Oil Is Bouncing Up Against Resistance

The above daily chart of July Crude Oil, shows that on May 6, 2015, July Crude Oil Futures topped out at $63.62 but fell back to close that day at $62.00. For the five weeks since then, no close above $62 has been achieved, although the $62 resistance area has been tested at least four times. As a short-term trader, one can benefit from buying the triple leveraged Bearish Crude Oil ETN (OTC:DWTI), whenever the $62 resistance area is approached. Since the $62 resistance area has been tested about 4 times without making a new high, it is proving how formidable the resistance is.

I still remain bullish crude oil and eventually see a move towards $65 and $70 plus. However, at the present time, it is better to scalp from the bearish side when hitting up against resistance levels. To review, back in February, $58 was the point of extreme resistance and there were three quick attempts to break above $58 that failed. Crude Oil traded in a tight $5 trading range from about $53 to $58. But after four 1/2 weeks, eventually July Crude Oil futures broke down to make a double bottom around $48. From that floor, Crude Oil was able to build a base that raised the resistance level from $58, to the current $62.

Now, should the current $62 resistance level be breached, expect formidable resistance again in the $65 to $66 area. From there, expect a similar $5 trading range from about $59 to $64 or $60 to $65. If we should break out to the upside, one can immediately take their loss and switch over to UWTI. However, if one is more bearish and is well capitalized, one can scale in buy more DWTI as DWTI drops lower and lower as crude oil rallies higher. If crude oil stops at $66 and forms the $5 trading range then when we swing to the low side, one can take off the higher priced DWTI shares at a profit.

We have traded for about 4 1/2 weeks and are due to make a move to higher ground, or to correct back lower to help build a base. Until we actually do break down (or up), I will continue to play the trading range of buying UWTI when crude oil is trading between $57 to $59, and DWTI when crude oil trades between $60 to $62. Crude Oil typically has a daily trading range of 2 to 3, sometimes 4%. With the triple leveraged ETNs, one can get a daily range of 6 to 9, sometimes 12%. With that kind of movement, it is not that difficult to catch 2 to 3 percent of the moves each day, and not having to hold anything overnight.

Summary:

Remember, you don't have to catch all the daily or weekly move, and trying to do so will get you in trouble. Play short term and hold the triple leveraged ETFs and ETNs part of the day if daytrading, which these products were designed for. Holding 2 or 3 days is allowed, but not preferred. Holding more than a week just makes too much slippage that is extremely difficult to overcome.

If you want to join us in our private Short Bull Trading Room on WeChat, just download the free app on your phone or tablet, and then add "bobed1". You can then send me a message so I can invite you into the room. Still plenty of room. See you there.

Disclaimer:

The thoughts and opinions in this article, along with all STOCKTALK posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

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