Trading Crude Light using the Buddha trade setup after a substantial upmove. While I’m sure that many of you have been watching the futures continue to rise with lower volume and not knowing if you should join the trend or short the market. Today we had opportunities to short various futures with a high probability of confidence that the trades would work. I will walk you through 2 Crude Light (CL) trades that I took today.
Trades for Crude Light
1st trade for CL was a “Buddha” trade. I will explain the entry and management of the trade starting from the 720 timeframe. It’s important to read your charts from the higher timeframes down to the lowest timeframe you trade. In this case I use the 720/180/45/12/3 minute timeframes.
720 min: Short volume divergence (VD) from Aug 4 – Aug 21 on the highs
180 min: Price bar on Aug 21 shows a buying climax (price made new high and closed at the bottom of the candle)
45 min: Price bar made new high on equal volume but closed in the lower quarter of the candle and the next bar closed below its open causing a Magenta Peak (MPK). Important to note that the ADX was >70 at the time of the MPK showing the market was highly over bought increasing the probabilities that price should go down.
12 min: VD between the highs and the ADX had a MPK with price retracing to the ATR.
3 min: Price had flipped the ATR from the ADX MPK and retested the ATR on VD with price then closing down giving you the “Buddha” entry for shorting the market.
3 min: At 8:09 PST price made new low and closed in upper quarter of price bar on VD. I exited on close of this bar.
2nd trade for CL today was a “Slow moving average” (SMA) entry. I will explain the entry and management of the trade starting from the 720 timeframe. It’s important to read your charts from the higher timeframes down to the lowest timeframe you trade.
In this case I use the 720/180/45/12/3 minute timeframes.
720 min: MPK with strong Short VD
180 min: Price still moving down from buying climax with MPK
45 min: ACE trade still in process from ADX MPK. Also note Short VD at 97.51 price bars
12 min: Short VD at 97.63 price levels and declining volume for buyers. Also note price closing down at ATR with Short VD
3 min: VD between 10:36 & 10:45 price bars with price closing below SMA on higher volume creating a short entry signal
Exit of “SMA” trade:
12 min: Short VD and then increasing Short volume supported trade direction
3min: Short volume was increasing until 11:30 allowing me to take clipper 2. I stayed in the trade where at 11:51 you can see there was Short VD on the close of the bar missing my stop by 3 ticks giving me confidence to stay in the trade. Also note that the buyers did not come back into the market, so the sellers continued to dominate giving me a clipper 3 profit.
All of these techniques are taught at our Master the Trade and Advanced Volume Analysis Seminars.