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Chart of the Day: Nested Pullback in Crude Oil

Crude Oil is consolidating lower following the break of the trendline. This pattern is perhaps more clear on the weekly chart, but it appears to be a small daily consolidation pointing lower. I used the term “nested pullback” in The Art & Science of Technical Analysis to refer to this pattern: a small, lower timeframe consolidation that occurs within the resolution of a directional, higher timeframe pattern. These trades can offer exceptional reward/risk characteristics with strong probability of a profitable resolution.

(Note that USO can be used to execute this trade, rather than futures, but be mindful of overnight gap risk.)

AdamHGrimes

Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 7 Comments

  1. Ken 05/12/2013

    I would like to know the complete setting of keltner channel you are using. I prefer your setting. In your book is too difficult to understand the setting. I am currently using MA PERIOD = 20, MA MODE = 0, PRICE MODE = 5, ATR PERIOD = 14, KELTNER = 2.5. Please state your setting.

  2. Adam Grimes 05/12/2013

    Hi Ken, I don’t know what software you’re using so I don’t know what “MA MODE = 0” means, but I do give the settings clearly in my book. (See pg. 52, for instance: “… Keltner channels set 2.25 multiples of ATR around a 20-period exponential moving average…” The exact settings you use are not nearly as important as understanding what they are measuring. Thanks for your question!

  3. ken 05/15/2013

    Thanks Adam for your kind reply. I am using Metatrader as my trading platform, but got one indicator called keltnerchannel v1 for free. I would like to know if you have any keltner channel indicator for metatrader? Or I can send you my indicator to test

  4. Adam Grimes 05/15/2013

    Hi Ken,
    I’m sorry but I can’t do custom indicator work. I have probably thousands of charts between the book and blog that show Keltners, so just recreate one of those and see if it matches mine reasonably closely. You might also ask in the Metatrader forums (which I’m assuming exist somewhere.) Once again, the exact settings you use are not as important as understanding what they are measuring. Understand that and what is really going on with your indicator, and you can adapt many indicators (or no indicators at all!) to do the job.

  5. Alex 05/22/2013

    Hi Adam, what about your ATR period? Is it set at 10-period?

    1. Adam Grimes 05/22/2013

      Once again, the exact details of the indicator settings are not nearly as important as the concepts. I think my ATR setting is 30, but anywhere from 20 to 40 should give you similar results in most cases.

      1. Alex 05/22/2013

        Yes, I understand that the parameters are not that important. But I am just curious to know. It has been a long time since you updated your blog. Would love to see your postings and analysis again soon. Thanks! 😉

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