Hypos

Crude news 8-10-16

The next step for me is to start formally writing my oil hypotheses, pre-market.  In the same way FT71 makes the ES hypos in his daily trader bite.

I don’t intend to publish this every day.  But I’m making a blog of it today, to establish the first day of a new practice.

I have had my ideas of how the day would play in mind each day for months, and it’s been a slow dawning of surprise how frequently accurate they are.

However, on many types of days, even when I’m right, I play wrong, and lose.  I usually do well on news days, but often at the expense of wild draw downs on the initial swings.

However, knowing that news days do usually spawn a trend, I take the draw downs, and reverse, sometimes twice.  And usually come out ahead.

However, this is not ideal performance.  And worse are the days I’m correct on hypo 1, but it plays slightly different than my idea, confuses me, and I lose instead of profiting….and then my idea works out after all.

So the idea is that formally committing the hypos may help stabilize my plays.

This same process can be applied to various products.  Although I’m posting this as a blog after the day, I set the hypos pre-market, and played pretty well.

I will add some detail for the purpose of the blog that I might left unsaid for personal use.

Hypo 1 was correct.

8-10-16, hypos 1-4

Overview:

  1. Unfinished business above and below (Gaps marked in grey…gaps “should” fill at some point)

older gap above $43.60-$3.77
bigger more recent below $42.40-$41.89

  1. we have a megaphone for 2 days which looks like a down reversal

I am including a chart that shows the entire move up from last Wednesday’s inventory day.

8-10-16 hypos

News days usually come in 2 flavors, lately.

  1. they make an initial impulse, pull back, continue, begin to trend, and never look back
  2. they make an initial impulse, then take it all back, reverse, flag, and trend in the opposite direction.

Today I’m expecting a type 2 day because

  1. We are opening inside the range of the last two days. Open in fact is exactly at yesterday’s close…so on any normal day, expect chop.
  2. My idea is that, due to the megaphone formation, the direction it wants to choose for the day is down. So I expect a fake up first.

Hypo 1:

news comes out

price fakes with spike to the upside to $43.80

finishes upper gap

then reverses, takes it back

and falls to $41.33 over the course of the day

for the 50% of the up move

then we base and continue up

Hypo 2

news hypo 2 is the opposite

I suspect a fake out kind of news day

hypo 3 and 4

are those two targets without the fake out

if no fake out, I think down is more likely

I think down is the more likely course for the day

what do you think?

to me, the chart does not look like a good base to mount another move higher

Here is what happened

8-10-16 oil action on news

First there was actually a tiny fake down move.  It happened on news to the second.

15 seconds later the reverse mounted.  The first purple line is where I started in short, starter size, based on my hypo 1 idea.  But in spite of all this preparation, I still got faked out and chopped, because price hung up there longer than 5 minutes.  I reversed long, slightly bigger size.  It looked like it might be up after all.

The bright white line that filled in at almost exactly $42 was halfback of the up move.  The line in the sand.  Once it pierced that, I knew my hypo 1 was back on.  I reversed for a loss, and added full size as quick as I could.  It happened fast.  I ended up with $42.84 short.

Chat commentary on action

6:52am

Kelly Evans

my hypos are on news

pre news, my hypo is unpredicatable chop

7:35am

Kelly Evans

so far bull flag with no down, my least likely hypo

7:38am

Brendan Hurley

Hmm

Fail? Seems really forced

7:39am

Kelly Evans

second touch of 50% level

7:39am

Brendan Hurley

That was some volume

7:39am

Kelly Evans

I think it may be yep

7:39am

Brendan Hurley

I’m staying out, big chop yd. Ill probably miss out

7:40am

Kelly Evans

I’m loading up

short

hypo 1

7:40am

Brendan Hurley

7:40am

Brendan Hurley

Wow

News was?

7:44am

Kelly Evans

build

draw expected

not that it matters of course

this just happens again and again

I hate to say it’s predictable

bit my tongue

I almost had the guts to short the high

but it came 40 cents short of that 43.80 level I suggested

but so far never took heat on my live position

got slightly chopped on the paper

I did originally short the pop

but when it held for 5 min reversed long

but when it broke the 50/% realized my hypo 1 was in play after all and reversed again

and added

nice bear flag here

nope, higher

mid of down is 88

Probability is still down under that 88

high probability imo

and now that I think it through, not finishing that gap above is actually good for my hypo 1

since hypo 1 included down today, base, set up for another push higher

so that leaves a magnet intact up there

if we literally chopped back up from here, it would be a very rare event

I can’t remember the news reversal ever being taken back

Here’s how the day played out.

Below is just my commentary as it happened, for historical purposes.

8-10-16 oil news complete day

7:52am

Brendan Hurley

.68 was the .30c

7:53am

Kelly Evans

yeah

but 88 is 50% of the whole down

last week it exactly held that

we had the reverse, then this action, then test the 50%

then continue

let’s see if it repeats

last week big fake out was people were REALLY expecting down

this week, everyone is thinking about that big guy last week, and REALLY expecting up

if this breaks down, then I hold all day

what I didn’t do before is hold longer, in to the night

41.33 is my target

but sometimes doesn’t get there in RTH (regular trading hours)

almost exactly $2 from the high

bulls fighting it

what time frame are they?

that’s the question

is it Exxon size bulls or just locals trying to guess XOM is there?

I think the latter

I think Exxon comes back at my target

just my 2 cents

the thing about guessing news days is…at first glance it seems foolish

like the least predictable thing

but how it’s starting to seem to me is, you look at what the chart technically seems to want to do, but often it stays messy in to news

then the market uses news as the excuse to do the bigger completion play

now we are getting the traditional big bear flag

this can last an hour or so

anywhere under 88 the idea stays in tact

it could attempt the h pattern and bounce all the way to 88

but I think less likely than follow through

there is a line of liquidity at low of day

the gap below was a bigger magnet than the one above

$41.80-$42.40

60 cents, that’s pretty big

plus it tested in to there last night

plus the 2 day megaphone

lots of stuff

here is low of day

through like butter

now I hold

pause at yd low

bear flagging there

not a very strong reference

now locals try to take in back in to yd range

try to trigger 80%

wrong type of day for that locals

next ON low

half of gap, $42.10

also a weak reference

bigger next target is gap fill

$41.80

and round # of 42

which was a high a couple of days back

those are all technical things though

the big 50% level is sort of a technical thing….but it’s also a level where Exxon or the big swinging dick guy might buy more

8:22am

Kelly Evans

there is the hold above the round #

8:23am

Brendan Hurley

It wil flush again first I think

8:23am

Kelly Evans

ledge in waterfall type situation

8:23am

Brendan Hurley

Then maybe hold

8:23am

Kelly Evans

indices flushing too

yeah, in oil, usually we get that late day flag in the direction of the move

which does not complete

then overnight it does

attempt by bulls to defend round #

succeeding for the moment

they are imagining a bull candle on the 5 or 15 min

8:32am

Kelly Evans

here is the 41.80s resistance

from here if it keeps moving down, it will likely be the grinding type trend

it has to dig through the inventory from a couple of days back to get lower

I still think that’s likely

it starts making a series of what look like bottoms

I hold unless one bounces more than 30 cents

this level also the bottom of megaphone down trend line support

also a weak, local idea

but if locals can do 30+ cents have to respect that

8:39am

Kelly Evans

http://tos.mx/3DUYWb

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tos.mx

 

8:40am

Kelly Evans

ES testing top of old range here

even if local bulls fail to get it up 30 cents, might pause here for an hour

8:42am

Brendan Hurley

Off the chart day,can’t see tails

8:43am

Kelly Evans

There are two main things in trading as I see it, mastering the product….which means being able to see the most likely thing at each stage

and two, actually playing it right, which involves plans and psychology, self analysis

how do you hold to your plan when the day starts to look wrong, and you take heat, but in the end, your plan works out? VS, how do you know when you are actually wrong, and should throw in the towel?

Locals trying to mount a V type reversal

Next thing to try is a W style

but this almost never happens on news day trend at this hour

still trying to mount that reversal

now they are imagining an inverse head and shoulders pattern

it went a little lower, and bulls bounced it

and they might imagine forming a big cup style rounded bottom at this level, above that inventory from last Thurs and Fri

some could be new locals looking at those levels, and some could be actual swing longs from those days

and they are all wondering where Exxon or that giant from last Wed will step back in

My guess is $41.33 as stated earlier, if he does

And even if he doesn’t it’s likely to bounce there, as swing locals anticipate he will

and all this might happen in the overnight session after today’s session

And all this might be wrong if it bounces more than 30 cents now

And if the $41.33 significantly breaks, we have to reassess

because 50% “should” hold, for the long thesis, on a 1 week bounce

If the time frame is longer, 61.8% is valid

but on the day time frame it’s not

And for one week, I think also not

so if $41.33 doesn’t hold, we have to start taking it day by day

8:57am

Kelly Evans

http://tos.mx/bzi8wU

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8:57am

Kelly Evans

the bigger picture bottom was an inverse head and shoulders type

9:03am

Kelly Evans

this could be it for the day session

last wed it went sideways starting at this hour

formed a messy flag, and completed over night

it made 1 feeble attempt to complete half hour before close

total run last wed was $1.87, including the feeble attempt

today we have so far done $1.60

it would be interesting to go back and study news run sizes

But $1.60 is pretty good for the day session

I think

my target is a full $2.07 out from the high

everything attempting cup style reversal

oil, ES NQ

there was the 30 cent up attempt

let’s see if it holds

I added

+1000 tick

shorted ES

Liquidity filled in above the 30 cents level

$42.10

hanging

any longs with conviction?

everything hanging

holding breath

tick in tiny zone at +100

indices nibble higher

I think it’s true what you said the other day, that you could scalp these 30cent flags that happen around this time

right now, we have a sympathy type situation with oil and Indices

tick falling – 500

needs lower to flush

-500 is weak

tick back to zero

everyone wondering if this is really the day things will start to flush

9:38am

Kelly Evans

definitely a pregnant pause

just over 1 hour now

scale my flag scalp

nice to play with house money

we’ve seen this cupping phenomena at the end of a bear trend news day lots of times

if I remember right, it often does not break down

would be worth going back through all Weds

course if indices got really bearish, it could be different today

it’s still early enough for indices to become more significantly down

just would need a flush size tick

-600 +

oil hanging by fingernails

10:00am

Kelly Evans

snapshot for future study

 

10:21am

Kelly Evans

indices follow through to the downside

but by this time it may be too late for a more significant flush

probably is

I’m flat in my real acct on oil

down to -1 in paper

still think we get lower, although maybe over night

closers might do that thing of poking lower by a hair, then closing in the middle of this distribution….about 42 ish

then overnight, sag down

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