In last night’s edition of Swing Trader’s Insight, my comment for the EMini S&P was “exit breakout buys. Taylor Trading sell Short day”. Wednesday’s big recovery was a breakout rally (I wrote about that HERE); this meant we could expect a Taylor Trading Sell Short day for Thursday, a day earlier than normal in the Taylor Trading cycle.
Normally we would watch the previous day high as the Sell Short day reference price- in this case, 2649.75 for the June EMini S&P. The market traded higher overnight, by the time we were strategizing for the day session it had made a much higher session high of 2667.00 and in the STI morning comment I suggested we use the overnight high as a higher reference price for a short sale.
The market spent much of the early day session trading sideways. Around 10 AM it started to rally, clearing the 2667.00 reference price. For about an hour it traded above the overnight high; the 11:15 AM move back below that level served as out trigger for a short sale.
It took a while for the selloff to take hold (2661 was Fibonacci retracement support). In a move that proved the old saying that “broken resistance becomes support”, the Wednesday high held as support; giving us a signal to cover shorts. You don’t want to overstay trades that are trading against the market’s trend, and a market that holds above the previous day high is a strong market.
In the end, we took profits and flattened up ahead of Friday’s monthly employment report, a data point I don’t want to make a bet on. Today could be shaping up as a narrow range day, which would give us another breakout trade opportunity after tomorrow’s NFP.
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