SMB Futures TOTD – 5/22/18

Merritt BlackFutures, Reading the Tape, Technical Plays

It’s time for the Futures Desk Trade of The Day!

The trade was in crude oil futures. Speaking of which, many think that this is a “wild west” market, and it’s truly not. It’s a great market with solid liquidity and often great momentum.

Key variables for the trade:

  • Failed attempt at breakout outside the prior day’s range
  • Failed attempt to stay above vwap for the session
  • Weak up leg to fade
  • “Poor low” to take out

Here’s the screen shot of the trade. You can see the short entry from .38 and the exit at .14 below:

CL Futures. 2min chart.


What didn’t happen on this day? Crude oil did not successfully break higher after attempting to. It failed below vwap first (pink line), then it falls back into the prior days range (green dashed line). The trader recognized weakness in the buyers as they retraced back into that previous day’s high. Therefore… the trader recognized the opportunity and got short accordingly.

After the initial move down after entry, price trades at the same low it had before (blue dotted line), and this is where it got really interesting. That area just so happened to be the vwap for the week. Buyers were defending it, but not with aggression, and we continued to build energy into the level. The pattern of multiple TPO periods pushing into the same low is called a “poor low” in Market Profile speak. It signifies an auction cycle that is not yet completed due to lack of excess at the low.

The resulting drive below the level was not surprising as all that energy was released. The trader let the price stabilize as buyers begin to come in from the prior day’s POC (see white market profile chart on left), then simply booked his profits (yellow arrow).

Not a bad little +3R scalp!

Do you know how often you have to be right if you can pull 3R’s from your winners? The answer: anything above 25% is #winning.

Trade well,


*No Relevant Positions