Treasury Bond futures had a big rally on Thursday as they rallied out of Wednesday’s breakout pattern. This gave them a Taylor Trading Technique Sell Short day signal for Friday.
Treasuries (Bonds, the 5 and 10 Year T Notes as well) had a breakout pattern Wednesday. They all showed range contraction from Tuesday as well as a doji bar, which indicate a lack of participation and lack of commitment to buying higher or selling lower, which would be needed to create a daily trend.
Breakout setups are often resolved by a big directional move in the following session, as traders decide on a direction, which pulls in more trade interest, setting up a positive feedback loop. That’s what we saw in Treasuries Thursday – they opened near the low of the range and rallied over the session, ending with a close near the daily high.
In the session following a breakout move I normally anticipate a Taylor Trading move in the opposite direction, so in this case Thursday’s breakout rally meant we would anticipate a Taylor Trading Sell Short day for Thursday. We look for a Sell Short day because the breakout rally of the previous day tends to create an “excess high” (to use the Market Profile term) that ends up marking a top and a trend change down.
The Taylor Trading Sell Short day tells us to look for a failed rally above the previous day high (the “reference price”) with the move back under the reference price being our signal for a short sale. Thus, for March T Bond futures we would watch 153-00 as our reference price today.
Bonds did have a rally and a sell signal before the employment report. I don’t like to take trades into major reports so I passed on this trade. My thought is that the result of a report tends to be a 50 / 50 proposition, and I’d like to take trades where I think I have better odds than that. Additionally, a report like NFP often causes the kind of “excess moves” we look for, and looking for trades after a report allows us to exploit other traders’ mistakes.
The initial move after the NFP was a rally back above our reference price and then the session high (153-05) to make a new high of 153-09. This rally failed as well and the subsequent drop back below either today’s lower high or the Thursday high could be used as a signal for a short sale.
The initial stop loss would go above today’s high of 153-09. We would hold shorts only when the market shows downside momentum and a new high would negate the bearish trend.
Bonds sold off in the wake of the employment report, making a series of lower highs to make a session low of 151-29around 8 AM (This was just above Fibonacci retracement support at 151-28). This low held until 9:40 when stocks finally rallied above their Thursday high (S&P futures have a breakout setup for today.
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.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.