The Taylor Trading Technique views market moves as a series of reactions to what the market has done recently. Knowing this help us to anticipate what a market is likely to do, based on what it did in the previous session.
For the EMini S&P futures, Friday was a breakout buy day. On Friday it opened near the session low, rallied above the previous session high and continued higher, closing near the top of the daily range.
In reaction to this, we anticipated a Taylor Trading Sell Short day for Monday. For a TTT Sell Short day we look for the market to open near the session high, (possibly) make a failed attempt to rally above the previous day high and then proceed to sell off over the course of the session, finally closing near the daily low.
For a standard TTT Sell Short day today, we would watch the Friday high of 2211.75 as the reference price. However, I often view the Sunday night trade as a session unto itself, as it occurs after the longest weekly break between sessions and it often trades distinctly from Friday’s action.
It was for this reason (Sunday as a separate trading session) that when I wrote this morning’s Swing Trader’s Insight morning watch list I suggested we use the overnight high (2208.50) as a lower reference price for the Sell Short day. If the market was unable to reach Friday’s high, the high from Sunday night could be a good reference price level for deciding whether we could look for a Sell Short day / failed rally trade setup.
The 8:30 AM open was 2206.25, well below both the overnight and the Friday high. Around 9:30 AM it reached a day session high of 2209.50. This rally quickly reversed, and the move back below this reference price gave us our first short sell signal. This led to a quick drop to 2201.25, about 40 minutes later.
In a continuation of a choppy session, the market rallied back up to a lower high of 2208.75. The lower day session high was a bearish signal, and this second failed rally gave a second opportunity to short the market. This selloff broke below the previous session low (2199.50), making a new low of 2198.25 late in the day before recovering into the close.
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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