I’m writing a report about identifying and trading breakout setups so I’ve been in that mindset for the past few days. As I’ve been looking for breakout trades the eMini S&P jumped out at me this morning as a trade candidate.
The eMini futures actually had a breakout setup for Wednesday, as Tuesday was an NR4 and a doji day. However, nothing panned out on Wednesday as it ended up with a more narrow range than Tuesday (Wednesday was an NR7). The NR7 meant the breakout signal carried over to Thursday, as I noted in last night’s Swing Trader’s Insight and then reinforced in this morning’s note.
For Thursday we had a couple prices we could use for triggers for a downside breakout. (I look at both sides ahead of time but we’ll talk about only the short side here.). The first two levels to watch were the last two daily lows of 2461.50 and 2460.00. Last night’s session low was 2458.50; as we restrict my trading to stock market hours we could use the overnight low as a more conservative entry.
The 8:30 AM open was 2460.50 and the market then rallied back above the Wednesday high. Either the early drop below the lows or the subsequent break around 8:55 AM were triggers for a short entry. The initial stop could go above the day session high of 2464.00 (I normally use a stop loss of 6.00 to 8.00 for the ES.).
The market traded lower over the morning, with the downside finding momentum after 10 AM. I continued to trail stop losses lower. After making the session low of 2440.75 it started trading sideways. If you had multiple contracts on it would make sense to take partial profits; I might keep part on (with a stop loss) to see if it will make another leg down this afternoon.
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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