[Chart Of The Week] Wait For Your Pitch, Then Swing!

JC Parets
September 9, 2020

In public markets, we have the ability to wait for our pitch. There are always new opportunities popping up, so if we miss one, we know there are plenty more on their way.

That's why one of the most important concepts we discuss in our work is the need for patience and knowing what we're going to do before it happens. By having a plan in place we can execute our plan once the conditions we've been patiently waiting for come to fruition.

A great example of this has been Crude Oil over the last few months.

Here's the chart of Crude Oil we've been monitoring over the last few months as prices came into former support near 3,200. Our plan was to look for a downside reversal as prices approached this key level, but instead, prices sat around for the last two months and are just now finally resolving to the downside.

Click on chart to enlarge view. 

And here's a closer look at the daily chart. Prices were slowly grinding higher despite a clear level of potential resistance, momentum diverging, and a downward-sloping 200-day moving average directly overhead.

Despite all of the reasons why prices should have resolved to the downside, they didn't...instead choosing to trade in a tight range and frustrate both buyers and sellers.

Well, until last week when prices finally broke to the downside with some meaningful follow-through, triggering our short entry and bringing the bear case back to life. And it's down another few hundred points this week.

Imagine waiting for this thesis to play out since June and then you miss it? You're probably feeling just like the people who were waiting for Silver to break out and missed the explosive rally that came once prices finally moved out of their multi-year range in May.

Patience is a key part of markets. We can wait as long as we need to for our perfect pitch, but we only get paid when we actually put on the trade. That's why all of our analysis is in the form of "if-then" statements. We determine what we want to see, it happens, and then we get involved.

For short-sellers patience has been key for capital preservation, so that they had money left to put to work once the market started presenting some opportunities on the short side. We're finally starting to see some emerge, as we outlined for members this weekend.

Now, market bulls are the ones having to exercise some patience. After months of gains on the long side, we're seeing a lot of failed breakouts, momentum divergences, and flat 200-day moving averages, which all suggest a more two-way tape is ahead of us.

We've outlined all of the reasons for this change in outlook and how we're approaching it for Premium Members over the last week, so if you haven't read those updates we'd highly recommend it.

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Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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