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Home / Futures Blog / Breakout Buy in the EMini S&P – January 26, 2018

Breakout Buy in the EMini S&P – January 26, 2018

January 26, 2018 by Scott Hoffman

In last night’s Swing Trader’s Insight I labeled the EMini S&P as a breakout trade candidate for today. I used this call along with today’s early session pattern to ride the market higher today.

Thursday’s bar was enough in of itself to give today’s breakout setup; the inside day, range contraction and doji bar all were evidence of a market coiling up for a move. Pulling back showed more evidence of a potential breakout – Tuesday was also a breakout setup, and the Wednesday close was within 1.50 of Tuesday. Thursday gave three closes within this tight window.

EMini S&P Daily Chart

Out of this setup we look for the market to make a directional breakout move; a day that sees the market move in one direction over the course of a session, showing only minor pullbacks against this move. Breakout trades often show a positive feedback loop as well as the market gains momentum as it moves farther from the initial equilibrium level.

Normally I suggest that we should stay agnostic about the direction a breakout will move, as it can be difficult to predict the direction out of a balanced pattern. I stuck to this today (I would have taken a downside breakout trade) however I especially liked the long side – the longer term trend is up and the ROC indicator was on a buy signal. Rather than use this to guess a direction, I used this to look for an early entry for a long side trade.

Normally I would use the previous day high as the primary upside breakout reference price. In this case I would normally look at the Wednesday swing high (2855.25) as a primary reference as it was a natural resistance / pivot point level. However, the combination of the uptrend and the fact that the market was well below standard breakout levels meant we might look for an earlier entry, depending on how the session started.

EMini S&P Intraday Chart

The 8:30 AM open was 2850.00 and made a session high 2852.75 just before 9 AM. This was just above the overnight high of 2852.25, meaning this was likely a significant level to watch. Because of this, I entered an order to go long if the market rallied above that 2852.75 session high, anticipating that this would be the trigger to start a bigger breakout rally.

We got our entry around 9:35; the initial stop loss could go below the session low. Note that the entry level then served as support until the rally started to take off around 11 AM. From there it has been a series of higher highs and higher lows through the day as the market worked higher. Today has been a good example of why it can be a good idea to trail stops rather than select profit targets, as breakout moves often continue over the course of a session.

 

Swing Trader's Insight Essential Reference Guide Cover

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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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.

Filed Under: Swing Trader's Insight

About Scott Hoffman

Scott graduated from the University of Chicago in 1986 with a degree in Economics. After graduation, Scott worked on the floor of the Chicago Mercantile Exchange then moved upstairs, serving as the personal broker to a former chairman of the Chicago Board of Trade. There, he worked as a broker and margin manager, starting up the firm’s full service brokerage division.

Today, Scott serves as an educator and mentor for new traders, and as a trading partner and ally for experienced traders. The breadth and depth of Scott’s knowledge make him the “go to guy” for both retail and institutional traders.

Scott also publishes two futures advisories, Swing Trader’s Insight and Trade or Fade. He also writes the futures trading blog at www.futuresinsightblog.com. Scott has written articles for a number of futures publications and has done numerous futures trading seminars, including seminars for both the CBOT and CME.

Scott offers his customers the knowledge he has gained from his more than 25 years of experience in the futures business. Scott is accepting new clients at this time.

Scott lives in suburban Chicago with his wife and three children. In his free time he enjoys coaching his children’s sports and various other athletic activities.

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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.

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