Gold and silver futures had breakout setups for today. Although we often don’t see good trade opportunities around the holidays, there were good moves in the precious metals futures today.
On Friday both gold and silver gave breakout signals for today. Both had inside days and a narrow range pattern- NR7 for gold and NR4 for silver. This meant we would look for the market to trend in one direction or the other over the course of the session today; our task would be to identify the direction early and then ride the move as the market trended.
Both gold and silver traded higher last night. Gold traded above Friday’s high (the standard reference price for an upside breakout) and silver gapped higher on last night’s open, opening above Friday’s high. I generally don’t enter new trades in the night session; this worked out today as the upside saw little follow through.
In fact, by the time I was writing this morning’s Swing Trader’s Insight watch list (read it here), both markets were moving lower and a downside breakout appeared likely. I like taking breakout trades in the second direction during a trading session as the initial move often traps traders going the wrong way; their liquidation can add momentum to the counter move.
Both gold and silver futures had good downside moves. Gold was pretty straightforward; the short entry occurred around 9:35 AM when it broke under Friday’s low.
Silver was a little different. When I got in this morning, silver futures were trading around 1600 (basis March futures), having made an overnight low at 1596.5. In the morning STI watch list I wrote to use the overnight low as a reference price for a downside breakout as Friday’s low (1583) seemed pretty low to wait for a sale.
The initial short entry occurred shortly after 8 AM as the overnight low was taken out. It hung around the overnight low for about an hour and a half, finally making a decisive break after 9:30 (when gold took out its Friday low). For silver, the Friday low held on the first test and then was broken around 10 AM.
Breaking Friday’s low accelerated the selloff, and it quickly fell to test last week’s low of 1554. Last week’s low ended up holding, giving as a signal to cover shorts.
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.
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.
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