On Thursday, crude oil futures sold off out of a breakout setup (Wednesday was an NR7 and doji bar day). Thursday’s action then gave a Taylor Trading Technique (TTT) Buy day signal for Friday, which gave us a good trade today.
Thursday’s pattern was what we would expect for both a downside breakout and a Taylor Trading Sell Short day. The market opened near the high of the daily range and proceeded to trend lower over the day, finally closing near the session low. The TTT says that we should anticipate a Buy day for the session following a day such as this. I like trading the Buy day after a downside breakout as the breakout move often has enough momentum to push prices “too low”, making the market “oversold”. (It’s OK to view markets as overbought or oversold, just don’t make that the sole reason for basing trading decisions.)
On a TTT Buy day we look for an initial move lower, below the reference price of the previous day low. I especially liked this setup as the $51.00 level is support for December crude oil (51.04 is a 50% retracement of the rally off the Oct. 6 low). IF the market held above or successfully tested the $51 level then an ensuing rally would be likely.
In this morning’s comment for Swing Trader’s Insight, my comment for Dec. crude oil was: “Taylor Trading Buy day. 51.28 is the reference price and for now I’d wait for it to recover it before going long. Aggressive traders could look to buy against 51.00 support.” At the time of writing, the market was below the Thursday low; I wanted to confirm the recovery by waiting for it to regain the reference price.
As it turned out, the aggressive entry worked fine, as there was a successful test of 51.00 at 8 AM. The recovery above the Thursday low of 51.28 came about 15 minutes later, triggering the conservative entry (I like to use stop orders to enter trades so I don’t have to send in orders in a hurry when a signal hits.)
A good rally followed this morning. 51.78 was a good first target for the rally, it being a 50% retracement of this week’s range from high to low. This level was hit around 9:45, and the market tailed off from there.
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.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.