Although yesterday’s blog post was about crude oil futures (read it here), I added a brief comment about yesterday’s Taylor Trading Technique signal for the EMini S&P futures, that they were on the Sell Short day of the TTT cycle. This meant today we would anticipate a TTT Buy day, and the result was a textbook Buy day rally today.
On Tuesday the eMinis sold off and closed near the session low, as would be expected for a TTT Sell Short day. In the TTT cycle, a Buy day follows a Sell Short day. It’s the day where Taylor’s “smart money” traders would be looking to go long. It’s also where the unsuspecting weak shorts would get short or stay short as they would look at the recent selloff and expect it to continue.
For a “textbook” TTT Buy day, it is a push below the previous session’s low that lures the weak shorts to sell at the lows. At the same time, this break is a signal to the “smart money” to buy, and for TTT traders to look for a buy signal.
The initial move below the previous day low is our heads up to look to buy. However, this is only the first step in the signal. We only want to go long when the market shows upside momentum; a move back above the previous session low is the TTT signal to go long.
EMinis pushed below Tuesday’s low (1907.50) overnight and were trading below that level at the 8:30 AM stock and pit market open. They moved back above it shortly after the open, giving our TTT Buy day signal for a long entry. The initial stop loss for this trade could go below the 8 AM low of 1904.00 or below the session low of 1903.00.
The rally quickly gained traction after the open. Regaining last Friday’s low of 1910.25 gave it a boost, and targets of 1918.25 (overnight high) and 1920.75 (Fibonacci retracement level) were rally objectives. It has had trouble pushing above the 1923 area; you could use this as a reason to take profits if you were so inclined. If you did exit, I mighty still look to buy if it rallied above the 1923.50 session high.
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