In last night’s Swing Trader’s Insight I labeled the EMini S&P as a breakout setup for today as a result of the inside day, doji bar and range contraction on Thursday. This setup allowed us to anticipate this morning’s rally.
As I writing this morning’s watch list I was wondering whether I would have to come up for a non-standard breakout entry. Normally I use the previous day high and low as reference prices however for much of the overnight session the ES was trading above the Thursday high.
Fortunately we saw a pattern that often seems to occur around the 8:30 stock market open, one if have written about a number of times. The market opened at 2566.50, and proceeded to drop below the Thursday high. After the sip, it rallied back above our reference price, which is the normal trigger for buying an upside breakout. It subsequently went back down to test the first day session low before the rally began in earnest.
The ES rallied over the morning. The first rally took it to 2572.50 before consolidating. That high was taken out just after 10 AM and the market continued higher, approaching the contract high of 2577.25. This morning’s action is a good example of why it can be good to be patient with breakout trades as they often tend over the course of a session. It’s why I prefer to trail stops in my favor rather than to pick profit targets for these trades, as it’s difficult to know ahead of time where a market move will end.
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.
Risk Disclosure
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.
