Coffee futures had a breakout setup for Monday. It ended up having a smaller range on Monday and it was a doji bar as well so the breakout setup carried over to Tuesday. The result was a big range move today.
Coffee is one of my favorite markets for breakout trades so on Monday I was looking for a potential trade. Yesterday, by the time I was into the office it had already made a failed move below the Friday low (failed breakout move). I was still bearish on coffee so for the remainder of the session I worked an order to short it if it broke the session low (149.70) but it never got taken out so there was no trade.
However, Monday ended up with a smaller range, an NR7, and it was also a doji bar so we had another breakout setup for Tuesday. For Tuesday we would watch the Monday high of 152.05 and low of 149.70 as our reference prices. I still preferred the short side (ROC was at a one week high) but I’ve found it’s best to keep an open mind as to direction for breakout trades.
Getting into the office a bit later paid off again this morning because earlier there was a small failed move above the Monday high. As with Monday, I would have looked to go long if today’s high had been taken out, while our downside breakout level was still the Monday low of 149.70.
This low was taken out just after 8 AM, triggering the short sale. By 8:45 it made a session low of 147.75, which was later taken out as the market dropped to a session low of 146.60, a move of about 300 points from the Monday low. Note that the moving average (20 period EMA) contained the move until 11:25 and failure to penetrate the 18 January low led to a recovery rally later in the session.
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