I was short this market last week before being stopped out on too tight a stop. The market came back up and I took the chance to get back in. I have been watching it all week. Oil ran up on the cold weather in the US and is now trading back towards the bottom of its $70-80 trading range (note that the price is higher for the March contract — this works in my favour as I am short). Media reports suggest that speculators have a large long position in oil; if that combined with the cold weather has failed to get the price outside of its range, that’s a bearish signal. Charts from IG Index, with the lines showing approx. entry point and stop level.

I was reading about Jesse Livermore last week and was struck by his use of turning points (like reaching the bottom of a trading range). If the market went back into the range, Livermore would be long; if it broke out, he would be short. He waited for the market to tell him which way it was likely to move. If you take this approach, however, you will find you can’t get as good an entry point as if you open a position before it has a big move. On the other hand, it seems to me that you are much more likely to be right. I think I have been too rigid in trying to get the best possible entry (again, influenced by Reminiscences of a Stock Operator). Sometimes jumping into an emerging or established trend is the right thing to do, and that is what I have done here, albeit on a pullback.

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