Although it didn’t “officially” have a breakout setup (no breakout patterns, per se), we still anticipated a breakout move for the stock index futures after the FOMC meeting ended. This meeting probably had the most uncertain outcome of recent meetings so a relatively large change in “fair value” was a likely outcome.
For the EMini S&P futures, we were anticipating a breakout trade after the 1 PM announcement. In a note I sent out around 12:30 I suggested we watch the session low of 2265.25 as our reference price for a downside breakout. As it turned out, this level was a 50% retracement of the past two days range so a break below there would likely lead to a move to Monday’s low.
The break actually took some time to get going; the first move was up with the down move beginning about five minutes later. The first break of our reference price came around 1:10 PM, triggering our first short sale signal. The market made a short covering rally into the start of Yellen’s press conference, leading to a test of our reference price level, leading to a test of our reference price level.
“Support becomes resistance” proved an accurate axiom as it was unable to hold above the reference level, turning back down to make a session low of 2248.00. It held over two tests of the Monday low, ending with a close in the middle of the post- FOMC range.
Essential Guide for Futures Swing Trading
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