Today was a Taylor Trading Sell Short day for the gold futures. There was an opportunity to sell overnight; a morning rally and selloff around President Trump’s US Dollar comments gave a second chance to sell.
For Swing Trader’s Insight (STI) I had the gold futures labeled as a Sell Short day by the Taylor Trading Technique. (Get a copy of the STI user’s guide below to learn the basics of the Taylor method.) The Sell Short day was reinforced by the high level of ROC (bottom panel of daily chart) which also gave a sell signal. In the bigger picture, the market was approaching the 2017 high of 1365.80, setting up a potential test of a major pivot point.
Initial Rally in Gold Futures
The setup for a Taylor Sell Short day is a failed rally above the previous session high – we look for that initial rally to be a short term peak and a subsequent trend change down. For the February gold futures our reference price was the Thursday high of 1361.60.
If you traded overnight you got a Sell Short day signal as gold rallied to 1365.40 (just shy of the 2017 high) before selling off. I trade during US hours so when I got to the desk I was watching gold move lower, reaching a session low of 1353.10. This was a great trade for those that took the overnight sale but it left me with nothing to do, or so I thought.
Gold resumed its rally as President Trump was set to interview with CNBC at the Davos forum. Maybe people thought President Trump would echo Treasury Secretary Mnuchin’s recent comments that seemed to be in favor of a weak US Dollar. Trump has previously made comments that a strong USD is bad for US export business so it wouldn’t be surprising for Trump to reiterate Mnuchin’s comments or simply let them stand.
Instead, President Trump said Mnuchin’s comments were taken out of context. Moreover he said: “The dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar. Our country is becoming so economically strong again and strong in other ways, too.” These comments caused reversals in the USD and Dollar sensitive commodities.
Selloff Trigger: Gold Declines
For gold, the Noon push above the Thursday high was our “heads up” to look for a subsequent selloff below the Thursday high; this decline would be the trigger for a Taylor Trading Sell Short Day sale.
We got the short sale trigger around 12:30 PM. I use stop orders for these entries; this allows me to have my trade plan ready ahead of time so I don’t have to try to enter orders in volatile markets. Not only does this tend to make for better entries, it allows me to trade logically rather than emotionally.
The initial stop loss for this trade could go above the 12:20 high of 1364.00, then trailed lower as the market sold off over the afternoon. The 16 January high of 1346.00 was a support / pivot point for the selloff; this was broken in the afternoon but it looks like it might hold on the close.
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.