This is what we currently see:
As we've indicated on the chart, the market has been consolidating in a tight ($3) range between $105 and $108 for over 48 hours and many will be wondering if it will ever break out.
On the one hand, the market is always happiest continuing to do whatever is is currently doing. This is a reflection of the fact that as time goes by more and more traders are tempted into the game.
Right now that range we are looking at is like no man's land with opposing armies pouring more and more forces into the trenches above and below it. Every time price approaches a boundary those opposing forces send it back the other way.
BUT - this never lasts forever. At some stage one side or other will field a weight of (order) power that the other side cannot contain and we will breakout. If the breakout succeeds the movement that follows will be magnified by the effect of those on the losing side of the market racing to liquidate their orders with as little lost as possible.
Having said this breakouts can just as easily reverse, if their motive energy runs out in the face of the inevitable counter-attack. And this is why attempting to trade them can be infuriating. In fact, over time the odds of consistently making money on breakout trades are not good. They only pay their way if a trader is prepared to ride those that do succeed to the max.
So, what should you do?
The safest strategy is not to trade them at all as when we reach breakout mode, false signals become the norm. If you have a long position you have a lot of support beneath the market at $104, $101 and $97; if we do sell-off, these will be the levels to watch.
BUT, if you are itching for a trade, we quite like a buy against the confluence of horizontal and rising support at around $104. The trigger would require a false breakout below the range followed by a swift and decisive counter move back into the range box.
If your bias is bearish, then you are looking for exactly the same sort of move - in reverse. Just bear in mind that the underlying sentiment is still up, and for us this doesn't change unless the market trades below $97 on building momentum.
In sum, the market is in breakout mode and the next 24 hours could see a breakout attempt. Trading breakouts is a tough game and we would only consider trading a counter-breakout move in alignment with our overarching bias...
If you can't bear to sit on your hands either, just be careful!