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Home / Futures Blog / Finding Trend Continuation Entries in Stock Index Futures

Finding Trend Continuation Entries in Stock Index Futures

April 13, 2012 by Scott Hoffman

Yesterday stock index futures staged a rally out of a breakout setup, closing near the session high. Following a breakout rally the Taylor Trading Technique tells us to anticipate a Sell short day; there were a number of interesting factors in today’s setup.

The daily chart is below. Yesterday’s rally stopped a Fibonacci retracement resistance of 1385.13, a 50% retracement of the selloff from the April 2 high to Tuesday’s low. I view the 50% retracement level as the reference price for where a correction is turning into a trend change, so holding under the 50% level would mean we should anticipate a turn back down. Held trade over it would indicate a likely continuation of the rally).

Emini S&P Futures Intraday April 13

5 minute chart

The TTT “reference price” for a Sell Short day is the previous session high, in this case 1386.25. This turned out to be a great sale; for me the issue was that the sell signal triggered around 9 PM last night, and that that time I was watching the Blackhawks game, not trading.

So looking at the market when I got in this morning we knew that the Sell Short day signal had triggered and the fact that it was trading so far below the reference price was ample evidence that the intraday trend was down. The morning’s issue was to find a setup for a short sale.

With the Taylor Trading Technique I generally prefer to take entries when the market is moving in the anticipated direction rather than trading countertrend. The TTT allows entry near changes in trend direction; as we’re able to enter so close to trend changes I think it’s important to have confirmation of the trend change.

I saw two confirmation points to use this morning. First was the overnight low at 1377.00, next was the Fibonacci retracement level at 1375.88. We used a move below those prices a trigger for a short sale as the market confirmed it was resuming the selloff. For now I would use roughly the 20 period EMA of 15 minutes (green line on the intraday chart) as the stop loss.

@ Scott Hoffman

This originally appeared as a blog post in Scott Hoffman’s Futures Insight Blog.

Risk Disclosure

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.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Swing Trader's Insight

About Scott Hoffman

Scott graduated from the University of Chicago in 1986 with a degree in Economics. After graduation, Scott worked on the floor of the Chicago Mercantile Exchange then moved upstairs, serving as the personal broker to a former chairman of the Chicago Board of Trade. There, he worked as a broker and margin manager, starting up the firm’s full service brokerage division.

Today, Scott serves as an educator and mentor for new traders, and as a trading partner and ally for experienced traders. The breadth and depth of Scott’s knowledge make him the “go to guy” for both retail and institutional traders.

Scott also publishes two futures advisories, Swing Trader’s Insight and Trade or Fade. He also writes the futures trading blog at www.futuresinsightblog.com. Scott has written articles for a number of futures publications and has done numerous futures trading seminars, including seminars for both the CBOT and CME.

Scott offers his customers the knowledge he has gained from his more than 25 years of experience in the futures business. Scott is accepting new clients at this time.

Scott lives in suburban Chicago with his wife and three children. In his free time he enjoys coaching his children’s sports and various other athletic activities.

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Risk Disclosure

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.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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