Hi, I have been using what I’ve learned from reading your books and articles to follow market movements but something happened yesterday that left me very confused. If you can provide some insight, that would be really appreciated.
Here is a screenshot of oil movement on a 3 minute chart:
-Consolidaton 1 (5am-9am): this makes sense to me; looks like bank traders added more sell trades here to take the price down further
-Consolidation 2 (9am-11am); this was surprising but it appears bank traders added buys here to take the price up and above Consolidation 1
-Fade (11:30am-2:30pm): this is where I got completely lost. I did not expect price to fall all the way down to brand new lows so quickly after it had just worked its way up moments ago. What happened? There were no news events yesterday,
Thank you,
My Response:
That spike you noticed on crude oil might have been caused by bank traders securing profits on their sell trades from the higher timeframes…
I’m not certain, though, since I don’t have access to a crude oil chart on MT4.
If you could do me a solid and send me images of the 1-hour and 5-minute charts, I could probably pinpoint what triggered that spike.
Continued…
Ok, here is the 1-hour chart – the area in orange is the one of interest with the huge green candle immediately followed by the huge red candle:
Here is the 5-min chart zoomed to different levels…
Let me know if you need anything else.
Thank you.
Response:
Thanks for sending the images over!
In the end, I managed to find some charts of crude oil, but I appreciate your help anyway.
The spike you mentioned appears to have been caused by one of two possibilities:
- Bank traders placing more buy trades to move the market upward.
- Bank traders taking some profits off sell trades, placed before the downward move.
The current price action doesn’t confirm either… but the strength of the upward move we saw on Friday leads me to think it might be because the bank traders placed buy trades, prompting the market to break the highs of the consolidation.
As you can see, the spike occurred when the market entered the demand zone I’ve marked between the blue lines…
This demand might have formed as a result of the bank traders placing buy trades.
However, it’s still unclear at the moment…
If you examine the 1-hour chart and look back to the 8th and 15th of December, you’ll notice two swings higher, beginning from around the same point as one another.
Along with the two swings we’ve seen on the 11th and 19th of January, all may have formed due to bank traders placing buy trades, leading the market to break above the highs of the consolidation which has persisted since the end of last year.
If the market continues to rise past the high made last week, on the 17th, it’s a strong sign the highs of the consolidation may get broken in the coming weeks.
If they don’t, and the market begins to fall again, you should monitor the demand zone I marked in the image.
This is because, if the banks have buy trades placed here, they won’t let the market fall below.
So, keep an eye out for entries long.
Hope this helps,
PAN.