In this morning’s Swing Trader’s Insight morning watch list I suggested we look to short the eMini S&P if the December futures dropped below 2098.00. We were looking for a short sale if an upside breakout failed.
Tuesday was a Taylor Trading Technique (TTT) Buy day for the eMini S&P and the pattern was consistent with a Buy day as it opened near the daily low and rallied over the course of the session to close near the high (daily chart is below).
Tuesday’s rally pushed the market above the 27 November high of 2098.25- this was a swing high and the highest high of the past two weeks. So Tuesday was the start of an attempted breakout above that high; Wednesday would likely be either a continuation of the upside breakout or a potential selloff if the rally failed.
Tuesday night’s low was 2098.00, a test of the breakout point. This reinforced the idea that this level was significant- a move below there would mean any traders who bought the upside breakout would have losing positions. That was why we would short a break of the low; the selloff could accelerate down in a positive feedback loop as it moved lower.
The first move off the 8:30 AM open was higher, pushing above Tuesday’s high of 2101.50 (the TTT Sell day objective). However, it was unable to reach the overnight high, and it traded in a small channel until 10 AM, with a 2098.00 double bottom.
2098.00 was broken shortly after 10 AM, triggering our short sale. After working lower in the late morning, the market broke sharply lower in the early afternoon as downward momentum intensified. The TTT and I usually look for one trade per market per day; this is a good example of why we do so. Markets tend to trend in one direction over the course of a session and the trend often accelerates as it moves later into the day. If we’re patient with holding a trade we can often capture a bigger move if we’re willing to hold it longer.
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.
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