Today was a Taylor Trading Technique (TTT) Sell Short day for the EMini S&P futures. As is often the case, Mondays often behave differently than the other four trading sessions of the week- I suspect it’s the longer break between trading sessions.
For a TTT Sell Short day, our standard setup is to look for a failed rally above the previous session high, which turns into a down move. That setup would have us looking at the Friday high of 2272.75 as our reference price. However, the Friday high was relatively high above Friday’s close. With the market trading lower Sunday night, reaching the Friday high would require an even bigger (and more unlikely) rally.
Because of this, we looked for a more likely reference price. I do this by viewing the Sunday night trade as a session unto itself, so we highs and lows from that session as another set of reference prices for gauging trend changes.
For this morning’s Swing Trader’s Insight watch list I suggested we use the Sunday night high of 2266.00 as a lower and more realistic reference price. As with any other TTT Sell Short day, we would look to short the market after a failed rally above our reference price.
The 8:30 AM open was 2262.50 (I generally look to trade during stock market hours) and within five minutes it had rallied above our 2266.00 reference price. A few minutes later it moved back below the reference price, triggering our short sale.
The initial stop loss for the trade could go above either today’s high of 2267.50 or the Friday high of 2272.75. By 9:15 AM it broke the Friday low, and at 10:40 it reached last week’s low of 2253.00. I would watch 2253.00 as a pivot point for more downside – the trend is down, which suggests more selloff to come.
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