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Home / Futures Blog / A Sell Short Day Trade for eMini SP Futures on Fed Day

A Sell Short Day Trade for eMini SP Futures on Fed Day

October 29, 2014 by Scott Hoffman

The Taylor Trading Technique is a trading method that is largely based on the principle of action and reaction- the direction of today’s market move often results in a move in the opposite direction in the following trading session.  Thus, if we can identify a market’s direction today, we can often anticipate its likely direction of movement for tomorrow. The second part of the process is to recognize when a market is beginning to make the move we anticipated and enter a trade when that occurs.

Breakout moves are often followed by a good Taylor Trading Technique trade. A breakout move often leads to an “overbought” or “oversold” market, which are conditions the TTT seeks to identify and exploit.

The stock index futures made this sequence today. Looking at the eMini S&P futures, we see that Tuesday was a breakout setup, as shown by the range contraction and doji bar. This led to a breakout rally on Wednesday, with a strong rally above the Tuesday high leading to a close near the top of the daily range.

The TTT suggests that we should anticipate a Sell Short day in the session following a breakout rally, as the rally creates an “overbought” market that squeezes out the weak shorts and attracts late to the party traders who buy at what turns out to be the top.

ESZ daily Oct 29

For the December eMini S&P futures we would look for a move above 1980.75 to be the last hurrah for the rally, with a subsequent move back below that level serving as the trigger for a short sale. For the stock index futures I normally look for this move after the 8:30 AM stock market and futures pit open- I don’t really like to trade stock indices in the pre-market trade.

The 8:30 open was 1979.75 and it promptly rallied to a new session high of 1985.75. This told us to look for a short sale opportunity, which we got around 9:20 when it fell back below the Wednesday high. This move (or the second test around 10:25 AM) was the trigger for our sale.

ESZ intraday Oct 29

The initial stop loss went above the session high of 1985.75; if it retraced back up to make a new high it would indicate the bearish momentum that got us short was no longer in effect.

The eMinis sold off over the morning and early afternoon, making a session low of 1971.50 around 12:40 PM.  If you didn’t want to risk a profitable trade into the FOMC announcement you could have taken profits before 1 PM.  If you wanted to stay short, the chart supported this as it had made lower highs and lower lows over the morning.

The market was selling off into 1 PM and the FOMC statement gave it more downside momentum. 1916.125 was a 50% retracement of the move from the Tuesday low to today’s high; it would be a good reference price / pivot point to see if the selloff would continue. It made a new session low of 1962.00 by 1:15; the rally back above the Fib level and a subsequent higher low of 1964.00 (made around 2:10 PM) suggested a low was in.

Swing Trader's Insight Essential Reference Guide Cover

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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Risk Disclosure

STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Swing Trader's Insight

About Scott Hoffman

Scott graduated from the University of Chicago in 1986 with a degree in Economics. After graduation, Scott worked on the floor of the Chicago Mercantile Exchange then moved upstairs, serving as the personal broker to a former chairman of the Chicago Board of Trade. There, he worked as a broker and margin manager, starting up the firm’s full service brokerage division.

Today, Scott serves as an educator and mentor for new traders, and as a trading partner and ally for experienced traders. The breadth and depth of Scott’s knowledge make him the “go to guy” for both retail and institutional traders.

Scott also publishes two futures advisories, Swing Trader’s Insight and Trade or Fade. He also writes the futures trading blog at www.futuresinsightblog.com. Scott has written articles for a number of futures publications and has done numerous futures trading seminars, including seminars for both the CBOT and CME.

Scott offers his customers the knowledge he has gained from his more than 25 years of experience in the futures business. Scott is accepting new clients at this time.

Scott lives in suburban Chicago with his wife and three children. In his free time he enjoys coaching his children’s sports and various other athletic activities.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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