There were a number of markets with breakout setups today – stock indices, some of the currencies, gold, silver, crude oil and soybeans. Live cattle were another breakout move candidate, and its late opening time meant we had time to watch the open this morning.
In last night’s edition of Swing Trader’s Insight I labeled the June live cattle futures as a breakout setup because of the NR7 (narrowest range of the previous seven days) and doji bar patterns shown Friday. These patterns told us to anticipate a directional move on Monday; we would look for a move beyond nearby support or resistance to serve as our trigger for a trade entry and hopefully a larger move in that direction.
For the June live cattle, the first support and resistance points to watch were the high and low from Friday. These were the levels where buyers stopped buying and sellers stopped selling; moving beyond them would be a signal that a breakout move was starting.
The 8:30 AM open was 125.65, above the Friday close. It was able to move a few ticks above the open before it turned lower and a selloff began. The selloff gained momentum quickly, and an 8:40 AM break below the Friday low triggered our short sale. The initial stop loss for the short could go anywhere between today’s high down to above the 20 period EMA (the green line on the intraday chart).
After hanging around the Friday low for the first hour (note how support became resistance), cattle broke below the early session low and fell to 122.17, the limit down price for the session. About 10 minutes later cattle came off limit down, a signal to cover shorts if you hadn’t done so.
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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