The eMini Russell futures had both a breakout setup and a Taylor Trading Technique Buy day signal today. This combination of patterns made for a good trade setup today.
By the Taylor Trading Technique (TTT), today all the stock index futures were on the Buy day of the cycle. This meant we might look for an early session selloff that would find an early bottom and trend reversal higher. We would look to go long early in the session, when the market started trending higher and ride the trend higher today.
The eMini Russell futures had a wrinkle in the setup as Friday was an NR4 (narrowest range of the previous four sessions) day, meaning we anticipate the market would make a strong directional move over the course of the session. Initially we should keep an open mind as to the direction of the move, letting the market decide which way it wants to go; we enter our position when the market decides on its direction.
For the eMini Russell futures this combination of signals worked out well today. On Sunday night the market pushed below Friday’s low (the TTT Buy day reference price), the selloff was stopped and a rally ensued. The rally back above Friday’s low was the standard buy signal for a TTT Buy day.
I generally prefer to trade the stock index futures during the stock market hours, so I wait for 8:30 AM to take trade signals. In this case, although we would have missed last night’s TTT Buy day entry, the overnight rally gave us confidence in today’s uptrend and suggested we look for other long entry setups.
This is where the breakout setup comes in. With breakout setups we look to enter trades on impulse moves, that is, moves in the direction of the day’s predominant trend. Thus, for an upside breakout we look to buy when a market trades above resistance level(s); these moves are confirmation of the trending move.
For the Russell today we had two initial reference levels to look for- the night session high of 1159.90 and the Fibonacci retracement level at 1164.00 (50% retracement from last week’s high to the overnight low). We could look for a move above these two prices to be the trigger for a long entry. Friday’s high of 1168.60 would be the standard long entry level for a breakout trade.
The 1159.90 overnight high was taken out minutes after the 8:30 open and the 1164.00 Fib resistance was hit about 10 minutes later. The initial stop loss could be placed below the day session low of 1158.20. Friday’s high of 1168.60 was initial hit just after 9 AM, and it was decisively exceeded an hour later.
Last week’s high of 1176.30 was the first objective for the rally- if a 50% level is taken out; the starting point is the primary objective. This was hit around 12:30. If you were inclined, you could use this as a place to take profits, as this was a substantial move for the morning. I prefer to treat them as reference prices, as we don’t know where a market move will end ahead of time.
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