The stock index futures had interesting setups for today. It was the second bullish session, so the Taylor Trading Technique would suggest a Sell Short day for Tuesday. They also had NR4 days on Monday, which told us to anticipate a breakout move for Tuesday.
In this morning’s Swing Trader’s Insight watch list I commented that overnight the eMini Russell futures had made the textbook pattern for a Sell Short day (failed rally above the previous day high) so we should be interested in trading a downside breakout, which would give more confirmation of the Sell Short day move.
Our standard reference prices for a breakout move are the high and low of the previous session. For the Russell futures this would be 1164.20 on the downside. However, because we already had some confirmation of a downside move (the high violation setup) we could potentially look for an earlier (higher) short entry. As we often like to do, we could look at the overnight low of 1169.20 for our early entry short sale level. (Overnight highs and lows often make for good reference prices for trades in the day session for stock index and grain futures.)
Around 8 AM it broke the overnight low but then managed to regain it at the 8:30 AM stock market open. The subsequent move back below it was the trigger for our initial short sale. The initial stop loss could go above the 7:35 AM high of 1172.90.
By 9 AM it fell to a session low of 1160.10. Here you could either take a quick profit or stay short in anticipation that bearish momentum would push it down to make lower lows. An intraday double top (1166.30 at 10:15 and then 1166.20 at 12:50 PM) encouraged another selloff, reaching an objective of 1157.60 (Friday’s low) shortly after 2 PM.
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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