Crude Oil Trading From Friday July 21

Calling a Top in Crude Oil Trading

Because of lower liquidity crude oil trading is generally more volatile than the ES. However on Friday we saw some excellent trades using a combination of the power indicator and the accumulation distribution indicator.

Beginning at approximately five minutes after the open on Friday and continuing until about 0930 EST, the ZoneTraderPro accumulation distribution indicator indicated heavy distribution was in process.  This set up and exhaustion trade which called the top for the day. The ZoneTraderPro power indicator had been steadily falling into the trade. As price was rising the indicator was giving a sell signal in all three time frames.

72117 Short Exhaustion Trade
72117 Short Exhaustion Trade

Immediately following the exhaustion trade which was good for 15 ticks, this trade was followed by a series of trend short trades.

Series of Short Trend Trades
Series of Short Trend Trades

At approximately 1130 we again see and exhaustion trade calling a top followed by a perfect set up for a reversal trade pattern. We again see the accumulation distribution indicator indicating that contracts are being distributed.

Short Reversal Trade
Short Reversal Trade

After the market fell another 60 ticks we finally see a series where the accumulation distribution indicator is telling us that an accumulation is underway. There is a clear trade in this picture.  There is a long counter trend trade at 1255 hours which worked out for more than 20 ticks.

Accumulation
Accumulation

Notice how after reaching the blue countertrend zone at $45.85 the power indicator was deep green and the distribution indicator was red.  That indicates to me a seller who had significant contracts to sell, and once his supply was exhausted, price rose.

This is clearly a very hard call to make if you were long from this position. Because at this point you do not know who is going to win this battle, a big seller or a very strong commitment from buyers, as evidenced by the power indicator.

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