Today was a Taylor Trading Technique Sell Short day for the eMini S&P futures. It has been an interesting session so I thought I would go through how I saw the day.
The daily chart is below. Last week’s big selloff meant Friday’s Buy day wasn’t especially clear after the fact as we didn’t see the close > open pattern we normally see for a Buy day. Nonetheless, Friday’s Buy day was followed by the Sell day on Monday, which did result in a big rally. The gap lower open Sunday night proved to be a capitulation low and bottom picking and short covering ensued on Monday.
The Taylor Trading Sell day on Monday would then anticipate a Sell Short day for Tuesday. On a Sell Short day we normally look for a failed rally above the previous day high to stop the rally and start a selloff, which we look to trade.
In this morning’s comment for Swing Trader’s Insight I labeled both 2051.00 (Monday high) and 2059.25 (overnight high) as reference prices- 2051.00 if the market couldn’t rally and simply sold off after the 8:30 AM open and 2059.25 if it staged an early rally.
Stocks sold off into the open and the first short sale was triggered minutes into the day session. It broke quickly but the selloff was unable to push below the overnight low of 2045.75 and a strong rally ensued as the volatility continued.
Things stayed interesting today. This rally pushed above 2059.25 (overnight high) around 9:45 AM and the dip back below there was the second sell signal. This proved to be a fake out, as it rallied to make a new session high about 45 minutes later. If you used a wide stop loss you might have stayed with this short; most traders would take the loss as a new high was a signal to cover shorts.
We still anticipated a selloff by the end of the session, so we could continue to look for sell signals. The lower highs from 10:30 to 11:05 was evidence of waning bullish momentum and the 11:20 move back below the overnight high was out third signal for a short. The market worked lower over the early afternoon, making a new session low of 2041.50 around 2:10 PM.
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.
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.