In last night’s Swing Trader’s Insight, the eMini S&P futures were identified as a breakout candidate. This told us to anticipate a directional move this morning, and the market gave us a good rally this morning.
We identified today as a breakout setup because of a number of patterns. Thursday was an NR4, there had been three consecutive daily doji bars and there were four consecutive closes within 1.50. This week’s balanced profile set the market up for a move out of the balance, in response to the employment report.
With breakout trading, we keep an open mind as to direction- we look for a move beyond nearby support or resistance to serve as a springboard to a larger move in the initial direction. This means we don’t have to try to figure out what effect a report will have on a market – we let the market decide which way it wants to go and we go along for the move.
For the eMini S&Ps today, the initial breakout levels were the Thursday high of 2279.75 and low of 2264.50. If you wanted to trade immediately after the payroll report, you got a buy signal when it traded above the Thursday high, and it made a session high of 2287.50 at the 8:30 AM stock market open.
I prefer to wait to take stock index trades after the 8:30 AM open- I’ve seen too many whipsaws in the premarket trade. Additionally, markets often retrace a move around the open, which gives us a second chance for an entry. Today was a good example of that second chance entry.
In the morning STI watch list I suggested we use the Wednesday swing high of 2285.00 as a second reference price for an upside breakout as it was roughly the high of the weekly channel. This level was exceeded in the premarket and shortly after the 8:30 open; it then corrected in the first minutes of the day session.
This dip gave us an opportunity to watch for a second entry, and we got our buy signals just after 8:45 AM. The initial stop loss could be placed below the day session low of 2283.00 or the Thursday high of 2279.75 (I didn’t show this because it was off the chart).
The market moved higher over the morning, reaching a session high of 2293.75 by about 10 AM. Note the “three pushes” pattern – this is something Linda Bradford Raschke taught me to look for. After making the high, pullbacks have been relatively shallow, making it relatively painless to stay long if you wanted to look more. Alternatively, you could take profits and potentially look to rebuy if it takes out the session high, looking for a move to last week’s contract high of 2299.50.
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.
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