Short Cruide Oil 82.80 via HOD.TO @ 9.03, Stop 8.80

Update the day after: Stopped out at $8.81 for a loss of $64.90 = 0.7% of account.

I’m giving this short oil play another try. See the topping COT (CFTC: Commitments of Traders) lagging open interest data (bottom of Fig. 1). I waited for a breakdown in the hourly chart (Fig. 2) to make my entry into this short. The market has been coiling up for the entire month of October. Something big is about to happen sooner or later. Perhaps the U.S. midterm election tomorrow can finally move this market?

Stop is at 8.80. Risk is ($9.03 – $8.80) * 250 = $57.50 + $9.90 commission = $67.40 = 0.68% of account. Position size is still small with this lack of market volume.

Crude Oil

Crude Oil, hourly chart

Sold 300 HOD.TO @ 9.12, Loss -0.6%

Update: Crude is making a dive. This might be the move that I waited but got stopped out.

I shorted crude oil on Friday afternoon below the 82 resistance. It was an undocumented trade. Now I am closing at a loss. It’s a slap on the hand for breaking my own trading rules.

Oil broke above 82 over the weekend. Fortunately, the opening gap was filled before noon and I took the opportunity to cover my short. I was down 1% at the open. Good thing I didn’t panic and waited patiently (with a hard stop just below the opening low) for a more rational exit. My planned stop was $9.15, the opening low was $8.87, and I covered at $9.12. Just a tad under my plan but a lot higher than the low so far.

Figure 1 is a chart of U.S. Oil Fund (USO) at the time of my exit. I traded the Horizons BetaPro Oil Bear Plus ETF (HOD.TO) as a vehicle for shorting crude oil. The chart of USO is a better proxy of crude oil prices as it’s a few magnitudes higher volume (i.e. more popular) than HOD.TO.

From the looks of it, I will stay on the sideline until at least the midterm election in the United States next week.

Loss for this trade is ($9.12 – $9.29) * 300 = -$51 – $9.90 commission = -$60.90 = -0.6%.

U.S. Oil Fund (USO)

Sold 300 HOD.TO @ 9.40, Profit +0.5%

I got whipsawed out of my crude oil short as the market consolidates. Seeing that the G20 is meeting in Seoul today and tomorrow, not much is happening on this flat Friday. EUR/USD is in a 100 pips range. S&P 500 is in a 5 points range. Maybe something will happen near the close, but I won’t be around for it as I have no position in the market anymore.

Crude oil is still looking bearish though as it is crawling on its short term support line (Fig. 1). Perhaps my stop was just too tight as I moved it up a couple of times to lock in some profits.

Profit is ($9.40 – $9.19) * 300 = $63 – $9.90 commission = $53.10 = 0.5% of account.

Crude Oil

Bought 300 HOD.TO @ 9.19, Stop 9.05

I shorted some crude oil to hedge my gold miner long right at 2 pm today. EURUSD looks to be trading in a range. And since FOMC and G20 are right around the corner, I am not expecting the market to do anything drastic (i.e. breakout). So I am shorting commodity (to long US dollar) as EUR/USD is at the top of its channel (Fig. 1). I picked Horizons BetaPro Oil Bear Plus ETF (HOD.TO) because it’s one of the most active reverse ETF on the TSX. I considered buying HFD.TO (for shorting financials) but that one has a fraction of the volume of HOD.TO.

The falling star candle right below the 82.50 resistance on the hourly chart of crude oil (Fig. 2) is also a factor in my timing.

Risk is ($9.19 – $9.05) * 300 = $42 + $9.90 commission = $51.90 = 0.5% of account.

Figures 1 and 2 were captured at the time of entry. The markets are still hanging on the ceiling approaching the close.

EUR/USD

Crude Oil

Sold 250 HOD.TO @ $10.04, Loss -0.88%

I just got psyched out by the Euro rise and oil strength. So I closed my oil short. My purchase price was $10.34 two days ago on Tuesday. Final result in this trade is ($10.04 – $10.34) – $4.95 x 2 commission = -$75 – $9.90 = $84.90 = 0.88% of RRSP trading account.

Normally I would wait for a retracement to exit, but the high volume of U.S. DB Oil Fund (DBO) at the close yesterday plus the lack of weakness at the open today (Figure 1) makes me uneasy.

Note that even though EUR/USD is making new highs today, the U.S. equity market isn’t following suit. In particular, S&P500 is still below previous resistance level around 1115. This may be a bear trap. Or, it could be a short term term. I couldn’t tell.

So I’m staying on the sideline for now and will just be watching the market play itself out.

As you can see from my trading log, my last three trades were not profitable (2 losses and 1 breakeven). As such, I am putting myself on a cautionary mode until I can grow my account back to my previous high point.

U.S. DB Oil Fund (DBO) intraday