In this morning’s Swing Trader’s Insight watch list my comment for crude oil futures was: “It’s an ‘exit breakout buys” day so a TTT Sell Short day was anticipated. Yesterday’s rally stopped at old low resistance of 9668; watch the Fibonacci retracement level at 9789 as a downside pivot.”
This ended up making for a good trade so I wanted to go back and expand on my cryptic statement. By the TTT I mean the Taylor Trading Technique, the basis for a lot of what I use for Swing Trader’s Insight. When I use the phrase “pivot point”, I mean a decision point level. In this case, I would watch the 97.88 level, either to see it hold as support or a level from which the selloff extended if broken.
With the Taylor Trading Technique there is normally a day between the Buy day and the Sell Short day. However, when a market makes a strong breakout move it often creates the “excess” high or low that marks a market top or bottom. In this case we saw a breakout rally on Monday- it wasn’t especially energetic because the daily trend is down, and it stopped at old low resistance of 98.68.
With today’s Sell Short day we would ideally look for a failed rally above the previous day high for a short sale setup. However, at 7 AM we not only hadn’t seen a rally, the market was selling off. As the daily trend was down we were interested in alternate setups to short the market.
The 97.88 pivot point was a 50% retracement level from Friday’s low to Monday’s high. Given the market was moving lower today, we could look to short a break below this pivot point level, anticipating the market would continue to head lower. I usually use the starting point of the retracement as the objective for this move; in this case our target would be Friday’s low of 97.09 basis CLU.
We just missed getting short around 8:50 AM as it made a session low of 97.90. Our sell signal was hit around 9:20 when it dropped below 97.88. I highlighted the two previous intraday swing highs as possible stops for a stop loss. Crude trended lower for the morning and our 97.09 objective was hit around 12:20 PM. The daily trend is lower so you could use Friday’s 97.09 low as a pivot point to anticipate more downside if you wanted to play for more downside.
There were similar Sell Short day setups in the stock index futures, minus a breakout setup from Friday. The eMini S&P and NASDAQ have fallen solidly below an equivalent Fib pivot level and the Russell is currently trading around its Fib level. If you’re a stock index trader, the eMini S&P market followed a similar pattern to crude oil; it might be a pattern for you to look for some time later.
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.
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