For the EMini S&P futures today, a combination of patterns told traders to anticipate an early session rally above the previous session high. We would look for this rally to fail, and then get short when the market started moving lower.
In this morning’s Swing Trader’s Insight Watch list (read it here) I wrote that we should look for a Taylor Trading Technique (TTT) Sell Short day trade in the EMini S&P futures. The market made the anticipated move; here’s how I traded it.
In last night’s STI advisory I labeled the EMinis as a TTT Sell Short day; I also noted that it had a high range close (the H/L column in the nightly advisory). The high range close (I define this as the upper 20% of the day’s range) indicates the market has a high likelihood of trading above the previous session high, and to look for the rally to continue as long as it remained above the previous day high. (We had this signal for Thursday as well, resulting in Thursday’s rally.)
The TTT Sell Short day also told us to anticipate early strength in the market, but to anticipate a downside reversal. Our play would be to short the market IF it reversed and started moving lower. As we used the previous day high as a reference price for Wednesday’s high continuation rally signal, we would use the previous day high as our reference price for the anticipated downside reversal of the TTT Sell Short day.
The market traded around unchanged to slightly lower overnight and early morning. The monthly employment report caused a rally, pushing it above the previous day high to make a session high of 2062.00. The rally stalled here, and the move back under 2058.50 gave a first short sale signal if you wanted to trade the premarket (I generally wait for the 8:30 AM open to trade.)
The EMinis rallied into the 8:30 AM open, starting the day session at 2060.50. At the open we looked for two potential trade setups- either a failed rally above the 2062.00 premarket high or else a drop back under Thursday’s high of 2058.50. The market dropped, and our short sale was triggered right after the open. The initial stop loss was placed above today’s high of 2062.00.
It quickly sold off, dropping to 2050.50 shortly after 8:30. If you missed the short on the open, you could use a break below this low as a trigger for a short entry (confirmation of resumption of the down trend). The selloff continued through the morning, making lower highs and lower lows until it put in a double bottom at 2031.25 around 10:30 AM. At this point we could cover our shorts and call it a day, or potentially look to re short it if it dropped below the session low.
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.
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.
