In last night’s edition of Swing Trader’s Insight I listed the EMini S&P futures as having a Taylor Trading Technique Buy day signal for today, and I reiterated that signal in this morning’s STI watch list. Here’s how I approached it.
The E-mini S&P futures were on a TTT Buy day signal today; on Tuesday the market closed toward the bottom of the daily range and the ROC indicator had dropped to a buy signal level. This told us to potentially look for some further early downside before it put in a low and began a rally. We would look to go long when the market began to rally.
On a normal TTT Buy day we would use the previous session low as the reference price for the Buy day- an initial move below the reference price to give us a heads up for a potential upside reversal, and then a subsequent rally back above the reference price would be our trigger to go long.
However, last night’s trade took the market well below the Tuesday low so we could come up with an alternate plan. When I was writing the STI watch list, it had fallen below last week’s low of 2062.00 and 2060.70, the 50 day SMA, making a session low of 2053.75.
I suggested we use last week’s 2062.00 low as the reference price – it appeared unlikely it would drop back to retest the overnight low, and Tuesday’s low (2070.75) was a pretty big rally from where it was pre-open.
The market had different ideas this morning; it was falling into the 8:30 AM stock market open, and took out the 2053.75 overnight low after 9 AM. This move below the overnight low was our heads up to look for an upside reversal to go long.
After making a new session low of 2046.50 the market turned higher. It put in a higher low and then rallied above our 2073.75 reference price, giving our first signal to go long. It made a higher low (two higher lows after the session lows) before the second move above the reference price.
A rally ensued, reaching Tuesday’s 2070.75 low (objective / standard TTT Buy day reference price) by 12.45 PM. A cautious trader could take profits here, or we could hold on, looking to see if the market rallied above the reference price for a standard TTT Buy day entry. The rally gained momentum as it moved above Tuesday’s high as it brought in more short covering and buying from new longs.
Should we take longs home overnight? If we bought on the test of the overnight low I might be inclined to take profits, as we had a move of about 20 points from our entry. On the other hand, ROC is still low enough that it would support further upside for Thursday.
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