In last night’s Swing Trader’s Insight, the comment for the eMini S&P futures was “cover breakout sales, (Taylor Trading Technique) Buy day. This meant we would look for the market to potentially trade lower, find a bottom, and then rally.
On Friday(see the daily chart below) the eMini S&P sold off out of a breakout setup, selling off over the course of the day to close near the session low. A breakout selloff move often creates the “excess low” (to use a Market Profile term) that marks the low of a move and a subsequent upside reversal.
However, breakout moves often occur in emotional market conditions. This means the momentum from the breakout move may or may not see follow through in the following session. As always, the market is the boss; we anticipate what we think it will do and trade if it does what we looked for.
For a Taylor Trading Technique Buy day we use the previous session low as our standard reference price. A move below the previous low gives us a “heads up” to look for an upside reversal and a move back above the previous low is our trigger to go long.
As is often the case (especially on a Sunday night), the previous day’s momentum followed through. In the overnight session the March eMini S&P traded to a session low of 1991.25, testing the November low. This area (1991.75 to 1991.25) gave us an additional reference price for the Taylor Trading Buy day during the day session.
After the 8:30 AM open the market sold off, initially holding above the overnight low before rallying. If you chose to take this buy signal you would have gone long around 9:30 AM. However, this rally failed quickly, and the break of the overnight low stopped us out of the first long entry. (We stopped out when the market made a new low as it meant the market wasn’t done going lower; we get out and look for a better price and / or setup later.)
The selloff continued, making a new session low around 10:30 AM. This time the low did hold, and moves back above 1991.25 (overnight low) and then 1996.25 (Friday low) gave us our second buy signal(s) of the day. From here the market rallied, reaching and stalling out at the day session high of 2014.00, which was a natural place to take profits at the end of the day.
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
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.
