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Commodity Price Breakout

In order to accurately anticipate a commodity price breakout, traders need to routinely do both fundamental and technical analysis. Of the two types of analysis, technical analysis is typically more important than fundamental analysis for predicting sharp turns in the market. When the fundamentals of a commodity change anyone who was able to correctly anticipate the commodity price and traded according will have profited. However, fundamental changes in commodities are often something that traders read about and not what most will typically predict. When the commodity price breakout has happened it is up to the day trader to effectively trade commodities market changes via trading signals. It is wise for the trader new to commodities trading to learn the basics through Commodities and Futures Trading before engaging in live commodity trading. For those interested in options trading on the commodities markets Options Training with Stephen Bigelow is a wise choice.

A commodity price breakout can be either up or down form an established trend. A large number of factors can cause a dramatic shift in commodities prices. Oil futures are obviously subject to different factors than are corn futures, or gold futures. What is important is for the trader to know and understand the commodity being traded. Economic factors can drastically change the commodity futures prices of oil and gold whereas weather conditions can strongly affect the price of corn futures. Fundamental commodity analysis will alert the trader to when a commodity may be ready for a commodity price breakout. However, it is through the use of technical analysis tools such as Candlestick pattern formations and Candlestick trading tactics that the trader may be able to anticipate the day, hour, or minute, as opposed to the month or year, that a commodity price breakout will occur.

The use of technical analysis with Candlesticks goes back hundreds of years but is as useful today as when it was invented. Because trading patterns repeat themselves the first part of a pattern can be used to predict the second part. The technical trader may be fully aware of every possible fundamental pertinent to the commodity he or she is trading but will studiously trade according to the technical commodity trading signals from the online trading software he or she is using.

There can be many reasons why a commodity price trend will suddenly reverse itself or a commodity that traded in a very narrow range will suddenly break out. When the market starts to move is too late to do extensive fundamental commodity analysis. At that time the trader relies on his or her technical signals from the likes of Candlestick analysis with Candlestick charting techniques. The encyclopedia of trading knowledge that is Candlestick basis can commonly predict changes in the market when fundamental analysis will miss the short term clues. It is the actions of the sum of all other traders to which commodities traders look for clues when things are moving fast in commodities trading. This information is the pattern of the commodity price, recorded minute by minute and second by second. This is the information that the trader will use to precisely predict and successfully trade a commodity price breakout.



Market Direction:

The Dow traded very indecisively today. They came back and tested the 200 day moving average and the tee line. It finished up as a Doji type day. With the stochastics in the overbought condition, the probabilities indicate continued pullback, another test of the 200 day moving average. However, the trend will move in the direction of how they open it tomorrow after today's Doji. The uptrend is still in progress as long as they do not close the markets below the tee line. The tee line should be a major component everybody's analysis. There will be days where an uptrend will see a candlestick sell signal followed by weakness. But if that weakness does not breach the tee line, the uptrend has to be considered to be in progress. That was clearly evident with the position we have been following, PWER. Yesterday it closed right at the tee line without a very strong candlestick sell signal. Today it needed to open higher and trade higher to remain in the position. It gapped open, just above the previous days open and formed a Doji. This clearly revealed the tee line was still acting as support. Coming up from the initial recommendation area, that $8.25 area, it was a little bit tentative yesterday closing at the tee line, the $9.75 level. Today's positive open provided relief and it is now trading in the $11.45 area after hours. Sticking with the basic rules applied to candlestick analysis definitely aids an investor to maintain a position to its fullest profitability area. There will be no Stock Chat on August 2nd and 5th due to traveling.

sorry no charts, technical problems today

Chat session tonight at 8 PM ET

Good Investing,

The Candlestick Forum Team


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