Trade Stocks and Commodities with the Insiders: Secrets of the COT Report

CHAPTER 15

Putting Theory to Work

Practicing What I Preach

 

 

 

Practice is the best of all instructors.

Publius Syrus (ca. 100 B.C.)

 

 

 

There’s not much left to talk about, and I sure don’t want to be accused of being “all hat and talk with no cows.” So let’s turn our attention to some of the major setups that have taken place over the past few years. Surely the future will see similar setups, times when the relationship of open interest (OI) and commercial buying and selling stacks up in the same way, a way you can use to find markets that should have large moves in the direction we know they should.

Ideally, then, and these do not appear every few weeks; they take time, but with 30 active markets to follow you will almost always have a potential trade, a market with OI at low levels while the commercials have been buying.

“Low levels” sounds subjective and it is, so you might want to use the OI tool I described earlier or just look for very low levels. With that in mind, please look at Figure 15.1. Go ahead, look, and if this is your book mark off these points. Oh, you may notice that the chart does not show the price action of bonds. Never mind, we will get to that in a moment, but first I want to make certain you can identify the OI/COT pattern I look for.

Figure 15.1 has been marked off for the commercials with a zero line showing when they are net long, above the zero line, or net short, below the zero line. As you might recall, we are not as concerned with their net position ...