Failed breakout moves can be great trade setups for the futures markets and Taylor Trading Technique setups are often a variation of this. Today’s trade in the eMini Russell futures was a good example of this.
In last night’s Swing Trader’s Insight the comment for the eMini Russel futures was “exit breakout buys, Sell Short day”. Friday’s breakout rally meant today was a Taylor Trading Technique Sell short day, and there was a good short sale this morning.
Last Wednesday and Thursday were breakout setup days- Wednesday was an inside day with range contraction and a doji; Thursday had a bigger range but was a doji bar as well. Out of this we would expect a breakout, directional move. We got this on Friday with the rally after the monthly employment report. The final stage of this rally came with the move above last Tuesday’s swing high at 1194.70.
By the Taylor Trading Technique, we anticipate that we will get a TTT Sell Short day in the session following a breakout rally. We anticipate a market move will end and the trend will reverse when a market gets “too expensive” or “too cheap” and breakout moves often create these situations.
For a Taylor Trading Technique Sell Short day the standard setup is to look for a failed rally above the previous session high. The Russell fulfilled that pattern today however the move back below Friday’s high occurred around 1 AM last night. This gave us confidence in the Sell Short day signal however we needed to find another entry setup.
That’s why in this morning’s STI watch list I pointed out last Tuesday’s high of 1194.70. Friday’s rally above that price was a stage in the upside breakout; a subsequent drop back below that level would be another signal of a failed rally.
The break below the reference price came minutes after the 8:30 AM open, pulling us into out short sale. The open range high of 1197.50 was a good spot for the initial stop loss; if the market rallied back above the high we would want to take our loss and look for another short sale setup later.
The Russell made a strong selloff this morning, making a session low of 1176.90 around 11 AM. Note the 20 period EMA contained the selloff until a little after 11:30 as market action turned sideways.
Try Swing Trader’s Insight for 14 Days
Swing Trader’s Insight Trial - This swing trading resource is designed to help you improve your trading skills and make you aware of trends and new potential opportunities in the commodities markets. Regardless of your current skill level, access to this exclusive swing trading information will enhance your trading experience.
Swing Trader’s Insight includes access to premium web content.
Swing Trader’s Insight includes an email newsletter subscription.
Swing Trader’s Insight trial lasts 14 days.
Essential Guide for Futures Swing Trading
In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.