This originally appeared as a blog post in Scott Hoffman’s Futures Insight Blog on Tuesday, July 08, 2014.
Of the three days in the Taylor Trading Technique cycle, I often don’t look to trade markets that are on the Sell day, as Sell days don’t have the clear directional bias of a Buy or a Sell Short day. However, there are some setups that can yield good trades on Sell days.
There was such a trade today in the crude oil futures. On a TTT Sell day we often look for a market to rally back up to a previous day high so if a Buy closes well below its session high, we can look for a decent sized rally in the following (Sell day) session.
Crude oil futures had such a setup today. August crude oil futures had a session high of 104.09 and closed at 103.53 on Monday. This gave a potential move of 56 cents / barrel for a Sell day rally on Tuesday.
Crude traded weak overnight, spending most of the session slightly below the unchanged level. It began to rally as we moved toward the US open and I pointed out the buying opportunity in the morning STI watch list.
Around 8 AM CT crude rallied above Monday’s close, triggering the long entry I suggested around 103.53. The initial stop loss could go either below the previous overnight low of 103.31 or the session low of 103.21.
Moving above unchanged accelerated the rally, and it reached our objective of Monday’s high (104.09) around 8:30 AM. I would be content with this profit as the daily trend is down and the market couldn’t maintain itself above Monday’s high.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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