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Aaron Lynch When researching a futures market to trade the heating oil market, the HO-SPOTV is maybe one that has slipped under your radar. To define it, heating oil is known as the No. 2 fuel oil, which accounts for about 25% of the yield out of a barrel of crude oil. It is the second largest "cut" after gasoline. For those who attended the recent Trading Tactics workshop in Sydney there was a case study that traders focussed on as a current ABC trade, that came up in their scan. At face value most can easily identify, in their software, the ABC long points. For the more advanced trader there should be key elements of both time and price that aid your decisions to go long.
The heating oil market is linked to the overall supply and demand for oil globally. We have focussed on crude oil as a market in the Gann Mastery workshops, as well as the Trading Tutors Newsletter. These two markets are not that dissimilar. They both create good ranges with high levels of liquidity and volume. For your reference this contract, like most of the energy futures, is traded on the New York Mercantile Exchange or NYMEX www.nymex.com.
The chart below contains the current ABC long trade that was filled on November 29. In terms of an ABC trade, it meets the requirements of a normal trade, as the trends of the daily and weekly swing charts are both up and we can enter within our limits.
Chart 1
click chart for more detail
Expanding your view to consider the position of the current market, in both price and time, can assist you in taking stronger ABC trades. The price action for the current pullback is sitting above the 50% danger zone. The price action did manage to push through this point, however, the bulls returned to support a move back above and have since made strong closes above $1.37.
The same concept of measuring 50% can also be done on the time scale. The recent bullish range from September to the highs in October was 44 calendar days, a somewhat significant number in time measurements. Halving that number gives us 22 days or November 13, which was a Saturday; the heating oil market had a low on November 15 - a Monday and has made higher tops and bottoms on the swing chart since. Combined with the ABC point, this supercharges the trade by entering with a structured plan and an approach that has taken the bigger picture of both time and price into the equation.
Many traders have commented on their new push into trading the energy markets. A strong bullish sentiment may be on the cards.
Good Trading
Aaron Lynch
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