In last night’s edition of Swing Trader’s Insight, the eMini S&P futures were labeled as a “Sell Short day” according to the Taylor Trading Technique (TTT) cycle. Today’s action was a textbook example of the TTT Sell Short day roadmap.
The TTT attempts to anticipate a market’s daily direction based on what it has done in the previous sessions. It then gives a general trade setup to look for if the market makes the anticipated move.
The TTT says markets move in a three day cycle of a Buy day, a Sell day and then a Sell Short day as it moves from a low to a high and then back down. It is by identifying a day’s pattern that we are able to anticipate which TTT cycle day will occur in the following session. For the ES, Tuesday was a Buy day, followed by a Sell day on Wednesday. This meant we would look for a Sell Short day for Thursday.
For a TTT Sell Short day the anticipated pattern is a failed rally against the previous day high early in the session. As this rally fails, the market will turn down and then trends lower for the session.
For the eMini S&Ps today, this meant we were looking for a failed rally against the Wednesday high of 2165.25. (Normally I limit stock index trades to the old pit hours of 8:30 AM CT to 3:15 PM; in this case there was a sell signal in the night session as well.)
The ES opened at 2161.25 and traded up to a day session high of 2165.75 before turning down. The move back down was our first sell signal this morning, and the double top made 20 minutes later was a second chance to short it (and a confirming signal for the first sale.)
For a Sell Short day, the initial stop loss goes above the high of the day of entry. Trades are contingent on the market momentum moving in the direction of our trade; if it makes a new high after our short then we have momentum on our side. We often don’t have the opportunity for such a tight stop loss but the principle of trading on the side of momentum would be the same.
Stocks then sold off over the course of the session, making a characteristic “3 pushes” pattern (as Linda Bradford Raschke calls it). The session low of 2137.25 was made around 1 PM, just above Fibonacci retracement support of 2136.50.
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 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.