In this morning’s Swing Trader’s Insight Morning Watch list, I commented that the eMini S&P futures were on a Buy day according to the Taylor Trading Technique. I liked the signal (the selloff was holding last week’s low) but being creative made the signal more effective.
The Taylor Trading Technique Buy day signal carried over from Tuesday. Friday gave a breakout setup for Monday, resulting in a selloff (a downside breakout move). It’s always important to take trades only when the market shows momentum in the direction we anticipated and it’s especially important for the session following a breakout move. Sometimes we see a Taylor Trading Technique move in the opposite direction of the breakout, while other times the following session continues to move in the direction of the breakout.
In this case, eMinis showed downside follow through on Tuesday so we would have either held off from going long or we would have sold out of long positions for a loss (depending on the entry pattern you followed). If a trade was moving against him, Taylor would take a (hopefully) small loss in anticipation of a better “play” (lower entry) later.
So last night we knew to anticipate a Taylor Trading Technique Buy day for Wednesday. We would again look to go long when the market showed bullish momentum, and Tuesday’s low of 1968.25 would be the standard reference price.
The eMinis ended up rallying last night; by this morning they were high enough that a drop back to Tuesday’s low would be unlikely, and if the selloff did occur it would indicate the market was weak enough that we should be wary of the long side.
For this reason I suggested we look for a higher reference price for our TTT Buy day signal. I chose the overnight low of 1973.00, which occurred around 2:40 AM. This was a significant low from last night but it wouldn’t require the market to drop clear down to the area of Tuesday’s low.
The 8:30 AM open was 1975.75, above our 1973.00 reference price. It first dropped below 1973.00 around 8:45, finally rallying decisively above it at 9:25. We could have bought anywhere in this time period- I prefer to enter with a buy stop above the reference price.
The initial stop loss could be placed either below today’s session low of 1969.50 or below Tuesday’s low of 1968.25. The market has rallied over the course of the morning and stops would be trailed higher is the market moved up. If you were looking for rally targets you could watch the Tuesday high of 1988.00 and then the Fibonacci retracement level at 1991.25.
Essential Guide for Futures Swing Trading
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