Thursday, September 2, 2010

Short RBOB into jobs number tomorrow

Below is a more micro look into the price action for RBOB (30 min chart). We also have a few things working in our favor on this trade. Tomorrow the jobs number comes out, it’s a three day weekend, and the market has rallied pretty hard. I think all of this adds up to a selloff into the weekend. I have no reason to believe that the job market has gotten any better since last month, even if it is it feels like this market has priced in a surprise.

RBOB is trading up near resistance at 1.9283 with another resistance level overhead at 1.9687. It is also running into overbought conditions on the 30 minute time frame (as seen above in lower study). I like the risk reward of getting short at 1.9250 using a $0.05 stop (1.9750), which means RBOB would have to blow past two levels of resistance. I chose a $0.05 stop as I found out $.02 was arbitrary and to tight. Instead I got a bit scientific and am using the ATR (see daily chart below, lower study) to give it some breathing room. I think there is at least $0.10 of downside on this trade.

I shorted 3 Oct RBOB contracts @ 1.9250 with a stop at 1.9750 (0.05 stop ~ ATR).

If I get a $0.02 retracement before the close I will take it.

1 comment:

  1. We are getting a nice sell-off in products this morning. Although the jobs number was better than expected and equities had rallied, products in the oil complex have sold off. I think they no that the number is worse than reported and the unemployment rate is a heavily manipulated number in my opinion.

    I covered my short RBOB position this morning for close to a $0.03 gain or about $3,700. Although I think there is more downside I would rather get flat going into the weekend and re-evaluate on Tuesday. I got the pop down that I was looking for. I still think RBOB has potential to move down to test bottom of the range.

    Equities have already given back about 50% of the initial surge. At 1100 on the /ES I took a short of the SPY by way of the $111 put and on the woosh down took it off for a nice 20% intraday gain.