The eMini S&P futures had two conflicting setups today. As is always the case, the market is the boss; we let the market decide which way it wants to go and we look to go with the trend.
Last Thursday the March eMini S&P made a contract high. The daily bar had breakout setup patterns as it was an NR7 day (narrowest trading range of the previous seven sessions) as well as a doji bar. These patterns showed market indecision on Thursday; we anticipated this would be resolved by a breakout, directional move on Friday.
Friday did have a directional move of sorts as the market opened near the high of the range and closed near the low, below the Thursday low. Normally this move would have us anticipate a Taylor Trading move in the opposite direction (a TTT Buy day) for the following session. However, Friday showed an even smaller trading range than Thursday so there was a potential breakout setup as well, and breakout moves can go in either direction.
The market gapped lower for the Sunday night open; this reinforced the breakout signal for today. For the day session we could look for a breakout rally if the market recovered to trade above resistance (the overnight high was the first upside level) OR we could look for the selloff to continue if the market broke support.
For the downside we could watch two levels. First was the overnight low of 2279.25. The second level was the January 6 high of 2277.00. This had served as contract high for much of January; last week’s rally above it led to the rally to the new high. As it had been resistance on the way up, we could watch it as support / pivot area on the way back down.
The overnight low was taken out a few minutes after the 8:30 AM open; the Jan. 6 high was broken about five minutes later, triggering our short sale. The initial stop loss could go above the pre-open double top at 2281.75.
The market fell hard this morning, making a series of lower highs and lower lows until making a bottom just before 10 AM. As it turned out, the market found support at the Fibonacci retracement level of 2263.75, which led to a small bounce and sideways trade for the next couple of hours. At this point I’d probably be done for the remained of the session; if you still wanted to trade you could look for a breakout of the late morning / early afternoon channel.
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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.