Anthony Speciale Stock Market Analyst

Better Way to

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Why You Must Plan the Trade Before You Trade the Plan

We’re halfway through the week, but you know what? When we get to the weekend, I’m excited for the next week!

That’s because the market opens, and I get the opportunity to share my experiences and knowledge with all of you, and I also just love the action.

Really, that’s what A Better Way to Wealth is all about. It’s finding something you’re so passionate about and then sharing it with others. That’s the reason that I do what I do. I am truly passionate about it.

And today, I want to talk about the energy sector, particularly the WTI light sweet crude futures sector. The reason I want to talk about this today with you is because this is the sector that I got started trading in. Now, you see the analysis on the charts, but I can do this on any chart.

I can read the chart exactly the same, and that is the skillset that I hope to teach and share with you as time goes on so that you too can have the ability to look at any chart on any timeframe and make a prediction about what is likely to happen.

Basically, what we’re going to do is break down the analysis and the trade opportunity, because there is an opportunity that’s set up, and I want to share it with you.

So, we are looking at the March 2022 contract for crude oil futures (Click here to view my chart on TradingView so you can follow along).

Daily Chart of Crude Oil Futures (March 2022 Contract) — Source: TradingView

I want to tell you what I’ve been seeing, what I believe could be the next move for oil and the opposite side as well. If it doesn’t work out as planned, which it may not, what can we do to manage and mitigate that?

Breaking Down the Trade

Breaking it down, the $86.50 price area can and should contain selling into and through later February. We’re just starting the month, so we’re looking at a month-long time horizon. This is important because we want to look at pictures that matter for the bigger move.

If we can isolate small opportunities inside of a big move, we can be wildly successful and wildly profitable.

Our objective here is the $92-$93 area as our target where the market could potentially place a high. If it does, we could see the price come up and then rotate and fall back over. And we have tons of support structures on the way down.

But I don’t want to get ahead of myself. I just want to put it in place that we know the market is clearly in an uptrend. Last week, on Jan. 26, we had what I call a confirmation breakout.

A confirmation breakout is a close of 1% beyond a support or resistance structure. In this case, we had a resistance structure, and we had a close at least 1% beyond it.

Now, you can see that we had a close above it back on the 19th, but price rolled right back over because we didn’t get that 1% confirmation. Not everybody uses this, but I do. I’m an ultra conservative trader, so I would rather find a reason not to be in the market than to just look for every nook and cranny.

We finally got our 1% confirmation, though, and we put a buy price up to $87.50. Currently, it’s trading at $87, so we pulled back ever so slightly.

But we have confirmed that old resistance is now acting as new support. The market tested it and has maintained above it as of this writing.

I don’t want to get ahead of ourselves, but let’s talk about beyond the upside we’re currently looking at. I would be very content taking a trade from $87.50 or $87 to $92. That’s a $5 move. That is 500 ticks or $5,000 on a single e-mini contract or $50,000 on a 10 lot of contracts.

You can scale back down into a smaller contract, but either way I still believe there is opportunity here. If we were to break through the $92-$93 area by another 1% confirmation, we would then be looking to $115 a barrel.

That’s not unrealistic. From a geopolitical standpoint, we have Russia and Ukraine tensions. The fact that our country, once energy independent, is no longer, we could easily see a barrel of oil exceed $100 again. However, I don’t want to focus on that right now, because it’s not an immediate concern of mine.

Both Sides of the Trade

Now, when you hear me talk about a trade, you will always hear me talk about both sides of it. It’s my job and my belief that I am supposed to give you all of the information and you are to make the very best decision for yourself based on the research that I have shared with you.

I advocate that you go get research from more than one person. I want you to hear the same thing several times, and I want you to follow someone’s research for a long time and know if it’s any good or not. There is a lot of lack of integrity out there, and I want to make sure that you feel that the information I give you is worthwhile.

I’m telling you this, not because you necessarily have to do anything with it, but you’ll look back and be able to say that I was right or wrong. My goal is to share this with you, and what you do with it is up to you.

The downside is that if the market breaks its support structure at $86.50 and closes below it on a weekly basis, it’s likely to continue to fall. It’s your job to determine whether you want to exit the trade or hold it to the full stop or wait and see if it gains some support and rises again.

I have placed a stop where I always place them. When I get a breakout, I go to the candle before and place a stop just below it. That’s my trade plan. Everyone’s plan is a bit different, however.

Some folks might just want to get out and close the position for a small loss. But that again becomes unique to the way you want to manage your money. It’s my job to show you different ways to do it but your job to decide how to do it.

If that happens and price breaks down, we have some support structures down around $75 and even $65. That could happen quickly, as the market typically sells off faster than it rallies, but at the moment we have an active buy signal that was confirmed. It has also tested and held support several times.

Price does seem, from the research, that it should push towards the $92 mark, and that should get us there in approximately two to three weeks.

The trade plan is spelled out as follows: Last week’s daily settlement on Jan. 26 at $87.35 confirmed the 1% margin above the $86.05 channel. If price settles on a weekly basis below $86.50, this trade likely fails. The $92 price areas should be obtained within several weeks, hopefully prior to contract expiration.

When you’re trading futures contracts, they expire and then you have to renew to a new contract. My goal is typically prior to expiration I want to normally take my profit off.

If price for some reason has rallied to some degree, and I’m only halfway to my target, I would likely just take my money off the table. I don’t know that I would reenter for just a little bit of a blip because I’d have to leave such a stop that it would probably make me feel uncomfortable.

I put that stop in place for intraday volatility. If the market got violent and we saw a big candlestick wick, it’s just to buy our way through a little volatility. Again, if the price does settle on a weekly basis below $86.50, it may very well be a gamechanger and time to get out of the trade.

Time to Make a Trade Plan

So, I wanted to take today’s opportunity to share this idea with you. Ultimately, whatever you do with this information is up to you, but I wanted to break down how technical analysis is really used to identify these areas where price can accelerate from. And if price does rotate back below, what the plan should or could be.

Those I will leave to you and your own trade plan, as everyone’s tolerance is a bit different. But I wanted to show you what the analysis itself looks like from a picture standpoint to a written standpoint and what the trade plan looks like because there has to be an actionable idea that comes from content.

When you have good content, the next step is to decipher what the actionable idea is. I wanted to walk through it and show you what it looks like because you’re going to see a lot more of this.

Again, I can do this in oil. I can do this is any other market as well. We recently had a trade like this that resulted in an $8 move, roughly. It was a great trade, and I took it with a 10 lot. It was about $72,000 or $73,000 from my exact entry to exit. It was on the prior contract, so the numbers are slightly different, but you can see it was the same idea.

We had a confirmed breakout, I placed my stop below the last candle that it broke out from, and price never really went against me. It kind of went sideways, pulled back slightly but then rallied. And this is what price does when it’s in a healthy trend.

It’s a consideration of impulse, correction, impulse, correction and so on. That’s a healthy trend. Nothing goes straight up, and that is a process of how the price moves. Then, you’ll see an area where the market consolidates or goes sideways, and that’s where the buyers and sellers are basically debating who’s going to win.

If the buyers win, price goes higher. If the sellers win, price goes lower. It’s a natural ebb and flow. You’ve just got to have a good trade plan and an understanding of what’s happening. Then, just stay disciplined, don’t get emotional and try to stay calm.

So, those are my words of wisdom for today and the idea I wanted to highlight. I wish you a beautiful and blessed day, and I look forward to speaking with you again soon.