Soybean futures were on the Buy day of the Taylor Trading cycle today. After an overnight selloff, the day session open gave a good opportunity to get long for the ensuing rally.
Following an NR7 and inside day on Monday (range contraction patterns), March soybeans had a breakout setup for Tuesday. Tuesday then had a downside breakout, showing a good selloff after breaking below the Monday low.
Breakout moves often create “unfair” highs and lows (to use Market Profile terms) as they are moves that tend to push markets to levels that make them “overbought” or “oversold”. The Taylor Trading Technique seeks to take advantage of these “unfair” levels to trade a potential reversal.
In this case, the downside breakout move on Tuesday meant we would anticipate a Taylor Trading Buy day for Wednesday. On a Buy day we initially look for an initial move below the previous day low. We then look to go long if the market reverses and trades back above the previous day low.
For soybeans, the market leaked lower overnight, moving lower into the AM halt as the US Dollar rallied. It ended below the Tuesday low, so we would watch what it did for the day session open.
The 8:30 open was 1041-2, and the overnight low of 1040-2 held in the first minutes. Within a few minutes it rallied above our 1042-4 reference price, triggering our long entry. The initial stop loss could be placed below the session low of 1040-2.
Beans rallied through the day session, reaching Tuesday’s high around 10:45 AM. This proved to be support, and the NOPA crush data (released at 11 AM) gave the rally another five cents by the close.
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