In this morning’s Swing Trader’s Insight watch list (read it HERE) I noted that the December live cattle futures were on a Buy day according to the Taylor Trading Technique. Cattle are is a strong uptrend; finding trend entries in a strongly trending market can be a challenge.
Before Monday, 163.87 had been the contract high for December live cattle futures. Monday saw the first move above the contract high, and there was a small correction on Tuesday as the market pushed back below the 10 Sept. high. The small range and inside day on Tuesday were indicative of a lack of interest in pushing the market lower.
Yesterday’s selloff set up a Taylor Trading Technique Buy day signal for today. For a TTT Buy day we normally watch the previous day low as a reference price, looking for a failed move below the reference price as the TTT buy signal.
The issue is that if a market has a strong trend it is less likely to see much of a push lower as fewer traders are interested in fighting the trend. When that’s the case we need to look for other patterns to tell us when to enter a trade.
In this case we used the previous contract high. The move below the previous high was an indication of a potential selloff and a move back above that high would be a signal that the uptrend was resuming and a trigger for a long entry.
The 163.87 high was taken out right after the 9:05 AM pit session open; this triggered our long entry. The initial stop loss would be placed below the session low of 163.27, for a risk of approximately $280 per contract. Cattle have trended high over the course of the session, as the TTT would expect, thus rewarding traders who had patience staying with the trade. Rallying above Monday’s high of 165.07 (the new contract high) gave the market another boost.
Essential Guide for Futures Swing Trading
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