Friday saw the USDA release its estimate of planted acreage for US corn and soybeans for 2018. Soybeans has a breakout setup ahead of the report and then saw a strong rally after the USDA forecast showed they expect lower soybean acreage this year. That breakout rally was a good trade opportunity; I wrote a blog article about it HERE.
Normally, the Taylor Trading cycle goes Buy day – Sell day – Sell Short day. Thus, a Buy day rally like Friday’s would then be followed by some upside follow through on a Day Two rally before a Sell Short day break on Day Three.
However, we often view breakout rally days differently. Rather than taking two days to reach a short term peak, the size and strength of a breakout rally often expends the bullish momentum in the first day, setting the stage for a Taylor Sell Short day on Day Two.
In last night’s edition of Swing Trader’s Insight, the May soybeans were listed as a Sell Short day. The Sell Short day meant we would look for a failed rally above the Friday high, with a subsequent move back below the Friday high being our trigger for a short sale.
On Sunday night, soybeans saw follow through rally, as Friday’s strong close continued to attract buyers. They topped out around 4 AM CT and then worked lower into the 8:30 AM day session open. Had the market stayed higher near the day open I would have considered using it as a higher reference price for a short sale, although we didn’t see this today.
As it was, the 8:30 AM open was 1053-2, and then fell below the Friday high about five minutes later, triggering our short sale. The initial stop loss went above the say session high of 1054-6, and trailed as the market moved lower.
If you missed the first sale, you got a second opportunity around 9 AM as it made another failed move above the Friday high. It has then trended lower over the morning- the intraday series of lower highs and lower lows made for an orderly selloff.
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