Let's start this year with a "Trade Of The Week", which I will do every week this year, if there is anything to do of course.
So let's start the analysis with Copper:
Copper is approaching the lower side of the CL.
In this first Chart, the weekly, you see that price halted at the L-MLH the last time, and shoot up above the CL again.
Then price get hammered back again.
This looks to be clear weakness.
Next we look at the daily.
As far as we can see, price reached a extreme to the upside.
But why do I say this could be a extreme?
1) Look how the handle of the CL catches price.
2) Price is trading below the last weekly high (broke support).
Combining the information from the weekly, I want to go short this market.
I know that price will reach the CL in over 80% of time.
So I did the following:
I bought a Put-DebitSpread, +3.16 Put, -3.12
Max Loss: Debit of $317.50 p.c.
Max. Profit: ($1000 - $317.50 (Debit) = $682.50 p.c.
What to look for in this trade:
Because the DebitSpread has negative Theta, I don't want to let this thing expire.
I close this trade for profit if time/price ratio is on my side, or if price drops very fast to the CL and through my D.S.
I close this trade if the market does not move and DTE (Days To Expiration = Time left in the Trade) is around 10-20 days.
So, Copper doesn't correspond to my wishes.
What's the picture here?
Well, price did bounce up again and is currently at the U-ML.
This looks like a Hagopian, but until the U-MLH is broken by a outside close, I don't count it as such.
Unfortunately I only have 38 days to go and the position is 33% under water.
What can I do to defend it?
Or should I even defend this potential loosing position?
These are questions that you need to answer BEVOR you enter your trades.
Do you know where the risk is managed?
...nope, not during the trade - it's when you create your roadmap, your plan for this trade. Right there you decide what to do when things go sour.
In this case my plan is to stick to the position until I see a break of the U-MLH (on a closing daily basis) or until the position has reached around 50% loss.
Looking forward to your questions and comments.
Here's the gift from the trading god.
Copper bounced at the U-MLH and fell very nice within one bar.
Now yesterday price bounced a little, but I think the message is clear (...who the hell cares about what I think...). OK - We will see if it was such a clear message ;-)
However - the position is lightly in the green (7.6% p.c.) and I hold on to it (36 days to go...).
2018-01-20 - Update
Copper makes it very thrilling now...
I don't like this low close...usually it's a sign of reversal.
I'l give it another couple days because I know, price is reaching the Centerline over 80% of time.
2018-01-23 - Update
Here we are - Three days later...
I was able to close this trade with another nice profit p.c.
I would rather liked to hold on to this trade, but time is playing against me and so I took the money and run...
It's OK, so I can allocate this junk of USD's to another high probability trade.
Always remember - Don't be a Pig! §8-)