Live Trade: Scalping Channel Breakouts and Reversals
Hello traders. Welcome to the scalping course and the fourth module, “Live Examples.” Today, we’re going to trade a channel and trend line break for a reversal scalp in crude oil. All right traders, this is the nine range bar chart of crude oil futures. And as you can see price has been trading inside a very nice channel respecting its support and resistance and its midline are very nicely. What we try to do is we’re trying to trade the breakout of this structure. And we have a pending order right here, below the previous low as you can see.
A five contract and our stops are going to be all the way up here, okay. Once we get filled, we are going to put our stops at around 40 ticks. Our first targets– let’s see where our first targets should go, okay. I think our first targets should go around this level so support and resistance. Well, mainly support. Just was this once as resistance. As you can see, it confluences with the daily pivot which is actually a nice zone of support. Let’s grab a Fibonacci retracement and let’s put on a retracement from the high of the move to the low of the move.
As you can see, we have the 50 Fibonacci level right there confluencing with the, well, the daily pivot and this area that is going to be our first target. Let’s see how many ticks are we going to profit from the entry zone to our target. We are going to take an even one to one, okay which is fine, I think on a breakout. And we are going to take three contracts out right here. We are going to take three contracts out and we are going to try and write the rest until we hit these lows that were tested again right here which confluence with the 76,4 of the entire move.
Let’s put on another bilimit order [SP] and modify it to two contracts, okay. This is the tray idea, okay. Once we get filled, we are going to put our stops. The reason we’re not putting our stops right now is because if price goes and tests this area, our stops are going to get filled on a long position. So, first we want to be short and then we want to put our stops, okay. Now, we’re going to go back once we get filled and we’re going to see how many– well we’re going to see if we can– if after the breakout, there’s some momentum to the down side to fill our first targets.
Now our second targets are around here– well are actually here and we are going to try to grab 91 ticks out of them. Okay traders, we just got filled on our short position here at the break of this ascending channel okay. We broke with the channel support and we got filled on our short position. Now we’re going to put our stops right where we said we would, at 40 ticks. Our first target is at 40 ticks. So, we have a one to one risk to reward ratio on the first part of our position. Then we are going to try to ride the rest down until we hit the lows which is also the 76,4 of the entire move up. Remember that– well this is a first [SP] [inaudible 00:04:21] so we might hit this area– well we might hit our targets right here at plus 40 ticks. Then, move up to test this load before continuing to the down side. If we have a corrective move to the upside, we are not going to panic but we are going to move our stops to break even after we hit our target.
So if we move up and test these lows, it’s going to be fine. But if we move higher, we are going to be taken out at break even. Right now, we are $240 in the money. We are just going to wait and see what happens next. So we just got filled on our first targets at plus 40 ticks and I have moved my stops to break even. And as you can see, we did get some bullish reaction out of the confluence between the pivot, where the daily daily pivot, the 50 Fibonacci retracement level of the entire move up, and this previous area of support. Another reason that I like where we took profits is because of the stochastic oscillator. Check it out. We are in very deep, oversold territory, I’m sorry. So I think we might make a correction to the upside before breaking with this area of resistance.
Now this blue line I just drew here is where I expect price to bounce– well to correct two to the up side before breaking down. Where we are in a free trade right now and we just locked in the trades cost and we are just writing the last two contracts for an extra 91 ticks. Okay guys, so as you can see, price broke abruptly with this level of support. Just a reminder that an oscillator can remain oversold in a very strong down move. We got some reaction on the 61,8 to the tick. We got some buyers here at the 61,8 pushing price up. So I think we are going to retest the daily pivot around the 58,68 level before continuing to a down side.
Now I’m going to move these stops right here above the daily pivot because if we move above the daily pivot, I think that I want to get out of the trade with some profits. We already made $1200 on the first three contracts and we are up 776 right now. We are waiting for this retrace back to the 50 and the daily pivot before a continuation to the down side. We are going to wait and see what happens. Right now, we are seeing some bearish reaction out of the previous support zone now being tested as resistance. But I think the buyers might push price up a little bit to the daily pivot before continuing to a down side.
Well, we got taken out of the rest of our position for a $450 win, so we made a $1600 total out of this trade. Well looking back at the position of my stop loss, of my trading stop, it would have been better to just leave it there. But as you can see, I’m in the buying power, once it got through the daily pivots just keep coming. So there is momentum to the up side and 58,75 was the level to get out, in my opinion. This is how you’re going to be trading the channels and trend line breakouts.