The stock index futures traded sideways this week, albeit in a relatively large range. Reflecting this, the eMini S&P had an inside and narrow range day on Thursday, which resolved itself in a strong rally on Friday as the broke out of the recent range.
In last night’s Swing Trader’s Insight we labeled the breakout setup for the S&P as Thursday was an inside and NR7 day as well as the second consecutive doji bar. We would anticipate a directional move out of this balanced pattern, looking to enter (hopefully) relatively early in the direction of the primary move.
On the upside we had two breakout levels to watch. The first level was Thursday’s high of 1902.50, with the weekly high of 1910.00 being a bigger test for a rally. We could look to go long if / when the market moved above these price(s), anticipating that this would be the start of a bigger rally. (If the market were to decline, we would be watching equivalent levels on the downside.)
This morning’s 8:30 open for the S&P was 1894.50, well under the two reference prices. It quickly rallied, rallying above our first reference level around 8:45 AM and triggering our first long entry. By 9:20 it made a session high of 1911.50.
The first move above 1910 was rejected, leading to a correction. However, this correction was contained by the Thursday high as resistance became support. Eventually it was able to sustain a move above 1910 and a short squeeze ensued as we moved into the afternoon. The likelihood of a squeeze is why I often look to hold breakout trades late into the session as markets often create a positive feedback loop as it moves late into the session.
Essential Guide for Futures Swing Trading
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