When it comes to Supply and Demand, "The level is good until it's not."

Despite wars and rumors of wars there are always opportunities to generate profits in the financial markets, particularly the Energies markets. 


The purpose of today's trade example is to demonstrate that once a level of Supply and Demand are created in the financial markets, the rule of thumb is that they are "good" until they are not... that is, until all the unfilled orders inside them are processed. No matter how old a level may be, they do not go "stale". 


Let's look at a trade of ours here at Sabre Trading Systems which closed in the opening minutes of the market at 6PM EST on Sunday March 6, 2022:

A long opportunity was alerted to us on the 4-hour chart on Crude Oil Futures in the wee morning hours of Wednesday, March 2 (2:36am to be exact!). That morning (after having the required coffee and bacon as part of one's trading routine) there was plenty of time (8+ hours) to evaluate the trade setup using our Formation / Location / Destination methodology. The trade met our rules-based qualification system which gave us permission to take the trade.


As is our practice, the destination (a.k.a, Target) was an opposing level of qualified Sabre Supply. The interesting part, and hence the jist of our article, is that no matter how old a level is, "a level is good until it is not." The level of untouched Supply identified was from July of 2008 – almost 14 years ago!


As you can see from the chart, price entered that target level and ricocheted right away like a cat on a hot stove! If you drill down to the 1-minute chart you can see that price stayed at that level for a full two minutes until all the Buy orders had become exhausted and the sellers were in control, driving price back down.


So, a level that was good, this 14 year old level of Supply, is good no longer. "The Supply Level is dead... Long live the Supply Level!"

 


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