Profiting Amid the Chaos of a Broken System

By: Joseph Russo | Wed, Jul 4, 2012
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Open Your Eyes

Should you stop trading and managing your investment positions because the financial system is broken and failing? Of course, you should not.

One must realize that "the system" was always broken and traded accordingly right throughout the whole of history. It is doing no differently now, and as a whole, the system itself deserves exploitation.

Granted, we are proponents of reform across the spectrum, however, until it manifests, we are still operating under the existing structure in spite of all its shortcomings.

Crude Oil

Back on May 4, we made public our short-term trading strategies performance relative to the collapse in the price of Crude Oil.

Today, we will bring you up to speed on our efforts to navigate "the system" profitably over the short-term.

The chart above, courtesy of the Chart-Cast Pilot, illustrates crude futures rallying from a prospective pivotal print low at $77.28 registering on June 28. Following multiple failed attempts to stabilize and set a bottom over the past several weeks, Crude Oil finally appears to have accomplished for now, a short-term tradable base.

Take note of our strategies daily equity performance illustrated in the first of three panels displayed at the bottom of the chart.

Our short-term trading strategy had been short from $82.97 on June 20. We took $2710 in profits for each short contract traded and reversed long a week later. This long position and the subsequent whipsawing short position taken near the 77.28 pivot low were both losers, giving back all of our recent gains plus another $1560 for good measure. Ouch!

Fear not however, as taking quick losses when wrong, as painful as they might be, is a necessary cost one must accept for undertaking such risk. All that matters is that one's winnings far outpace one's losses by a margin acceptable to undertaking such risks.

Below, today's $11,600 daily account balance of open profits for all short-term trading operations shows that we have been long crude oil from 6/29 at a price of $80.95, and hold open profit in this position in excess of $6,500 per contract.

Short Term Trading Accounts

Fusing Discretionary Chart Analysis with Non-Discretionary Trading Strategies

Back on June 11, outside the purview of the underlying trading strategy, upon Crude Oil trading beneath the 82 handle, we alerted members of a 5-pt sell trigger, which defined a boundary that would defend a downside price target of at least $77.28. On June 28, the pivot low occurred at exactly $77.28 per barrel.

Was this downside 5-pt trigger (equal to $5,000 dollars per contract) capturing its exact target simply a coincidence? Yes, the pivot low bottomed in coincidence precisely at our exact target. However, it is not coincident that we often realize such targets though rarely do we capture them precisely on the nose as we have here.

Crude Oil

Take further note that Crude Oil has closed today's session at a key area of horizontal support/resistance suggesting that the strong rally may stall over the short-term.

Although observers may use this type of ancillary chart analysis as actionable information relative to the underlying trading strategy, it is also useful for those who may wish to exercise discretion in overriding or trading around the strategy.

The ancillary fusion of consistently accurate chart analysis in concert with the constant monitoring of effectual non-discretionary underlying trading strategies is what gives the Chart-Cast Pilot an extraordinary competitive advantage.





Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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