In last night’s Swing Trader’s Insight, the eMini S&P futures were labeled a (Taylor Trading) Buy day. This meant we would look for the market to find early support at the previous day low and then rally. Here’s how this morning went.
For the eMini S&P, Tuesday was the Sell Short day of the Taylor Trading Technique (TTT) cycle. On a Taylor Trading Sell Short day the market opens near the session high and trends lower over the course of the session, finally closing near the daily low.
Because of the TTT cycle of Buy day, Sell day and Sell Short day we know that the Sell Short day pattern of Tuesday meant we would anticipate a Taylor Trading Buy day for Wednesday. However, knowing what to anticipate is only the first half of the picture; we trade only when we see the market is beginning to make the move we anticipate.
For a Taylor Trading Buy day, we look for the market to show early weakness. We use the previous day low (our reference price) to gauge this weakness. For a textbook TTT Buy day, we look for the market to make an initial move below the previous day low. This move lower encourages weak longs to sell out and the last of the bears to sell short. Against this, Taylor’s “smart money” traders are buying at the lows, precipitating a rally.
The eMini S&P futures followed this script exactly today. Stocks were slightly lower for much of last night, making a small move below the Tuesday low in the premarket before coming back up before the 8:30 AM open. (Although I follow the market overnight, I generally wait for the day session to actually trade.)
The 8:30 AM open was 2040.00 and the market sold off from there, pushing below our reference price about five minutes after the open. This dip and recovery rally was our trigger, triggering our buy signal on the subsequent move back above the previous day low.
Our initial stop loss went below the session low. We want to hold trades when the momentum is in our favor; if the market fell back and made a new low we would get out and wait for a new signal. The market trended higher over the course of the morning, making higher highs and higher lows as the day went on. We’re coming up on the 1 PM release of the release of the minutes from the last FOMC meeting; given its potential to move the market I would close out trades or tighten up stop loss orders to preserve profits.
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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