By the Taylor Trading Technique, today was a Sell Short day for the eMini S&P futures. I wasn’t enthusiastic about this signal however I have been asked about shorting it over the past couple of days so I thought I’d write about it.
I had subscribers interested in shorting the ES after Tuesday’s push above the January 6 high of 2277.00. Tuesday was a breakout rally. Sometimes we see the Taylor Trading Sell Short day in the following session, as breakout moves often produce the “unfair high” that leads to a selloff. Other times the market follows the normal Taylor cycle, and the Sell Short day occurs two days later. We let the market be the boss and trade only when momentum favors our direction.
Thus, Wednesday could have been the Taylor Sell Short day however the market never showed downside momentum, so we never shorted it and we looked for the Sell Short day for Thursday. The Wednesday high of 2295.25 was our reference price for this setup.
Overnight the market made a new contract high of 2299.50, and was back below the Wednesday high at the 8:30 AM open. After the open we did see a few pushes above our reference price, giving us opportunities to short. On the intraday chart I showed stops above the day session high of 2296.50; I would actually prefer to use the overnight high (2299.50) to give the trade a bit of room.
The market did trend lower over the morning, making a low of 2289.50 around 12:30. The fact that we had a shallow selloff is indicative of a strong market, which was why I was lukewarm on this signal.
Looking to Friday, the ES has a breakout setup. Thursday was an NR7 day and a doji bar. Will we see some additional excitement to end an exciting week?
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