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Home / Futures Blog / The eMini S&P Futures and Today’s Taylor Trading Cycle Trade

The eMini S&P Futures and Today’s Taylor Trading Cycle Trade

January 27, 2016 by Scott Hoffman

A trading session with a breakout rally is often followed by a Taylor Trading Technique Sell Short day. The eMini S&P futures followed this pattern today.

On Tuesday the eMini S&P had a rally out of a breakout setup (I wrote about yesterday’s trade HERE.), closing near the session high.  In the normal cycle of the Taylor Trading Technique (TTT), a Buy day is followed by a Sell day, a session in which we look for the market to trade back up to the previous day high and close relatively high in the range. The high close on the Sell day then sets the market up for a Sell Short day on the third day, where a failed rally above the previous day high leads to a reversal and selloff.

ESH daily Jan 27

However, things are often different following a breakout move. A breakout day is often an emotional trading session as the market’s strong momentum pushes the market above or below “value”; it’s this move beyond “value” that causes the trend to reverse a day early.

In the nightly Swing Trader’s Insight update the comment for the eMini S&P was “exit breakout buys”, Sell Short day. I reiterated that idea in this morning’s watch list, adding that the best trade opportunity would likely be after the 1 PM CT release of the FOMC meeting statement. We anticipate a decisive move and we were most likely to get a decisive move after the Fed, not before.

Stocks saw follow through strength this morning, moving above the Tuesday high to reach 1910.00 by around 11 AM. This rally was welcome; trading above the previous day high is the first move we look for on a TTT Sell Short day. The morning rally didn’t change our plan to look for a trade after the Fed but it gave us more confidence in the setup.

ESH intraday Jan 27

After the 1 PM release the eMini’s first move was to rally, reaching a high of 1909.50. Failure to push above the session high was the first signal that the rally was likely to fail. This failure led to an initial push lower, dropping back below Tuesday’s high and giving the initial sell signal. The market remained volatile, rallying up to 1906.75 before turning down again. The second push below Tuesday’s high proved to be the start of the decisive down move we anticipated.

As is often the case, being patient with a winning trade was rewarded late in the session.  A trending market often sets up a positive feedback loop late in the day, where momentum begets momentum as more traders bail out of losing trades and more traders initiate trades in the direction of the trend.

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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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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.

Filed Under: Swing Trader's Insight

About Scott Hoffman

Scott graduated from the University of Chicago in 1986 with a degree in Economics. After graduation, Scott worked on the floor of the Chicago Mercantile Exchange then moved upstairs, serving as the personal broker to a former chairman of the Chicago Board of Trade. There, he worked as a broker and margin manager, starting up the firm’s full service brokerage division.

Today, Scott serves as an educator and mentor for new traders, and as a trading partner and ally for experienced traders. The breadth and depth of Scott’s knowledge make him the “go to guy” for both retail and institutional traders.

Scott also publishes two futures advisories, Swing Trader’s Insight and Trade or Fade. He also writes the futures trading blog at www.futuresinsightblog.com. Scott has written articles for a number of futures publications and has done numerous futures trading seminars, including seminars for both the CBOT and CME.

Scott offers his customers the knowledge he has gained from his more than 25 years of experience in the futures business. Scott is accepting new clients at this time.

Scott lives in suburban Chicago with his wife and three children. In his free time he enjoys coaching his children’s sports and various other athletic activities.

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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.

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