When George Douglas Taylor wrote up his “Book Method” (the Taylor Trading technique) he used the previous session low or high as a “reference price” for a Buy day or a Sell Short day respectively. The longer trading hours have changed market structure, which can give us additional price levels to trade off.
Today was a Taylor Trading Buy day for the EMini S&P Futures. A standard Buy day setup would have us watch the Tuesday low of 2135.25 as the reference price for today- a move below the reference price would be a heads up to look to buy, and a subsequent move back above the reference price would be our buy signal.
In the extended overnight trade, however, the EMinis were sharply lower and well below the Tuesday low reference price. By 4:30 AM they moved down to make a session low of 2126.25, and they were around 2130 while I was writing the STI Morning watch List.
In the context of a Taylor Trading Buy day my comment suggested we look for one of two things. First, if the market was strong right of the gates after the 8:30 open then we could look to buy if it rallied back above the Tuesday high. On the other hand, we could watch the overnight low (2126.25), using it as an alternative Buy day reference price. (From a conceptual standpoint I think of the overnight trade as a discrete trading session, and use its highs and lows for TTT setups.)
EMinis moved lower on the open. Around 8:50 AM it pressed down, making a new session low of 2124.75. This was our heads up, and we got our buy signal within minutes as it moved back above the overnight low. Our initial stop loss would go below the session low in case of a momentum reversal.)
Stocks rallied through the early morning, reaching the Tuesday low around 10 AM and then about 10 minutes later it stalled out against the 20 day EMA, around 2140. It stalled out here and then drifted back lower. I would watch 2132.50 (the midpoint of today’s rally) as a pivot point for trend for the balance of the session. “Mean reversion” action is prevalent these days, and it’s been paying to lock in profits and take money off the table when you get it.
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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