After a two day rally in the eMini S&P futures, the Taylor Trading Technique (TTT) told us to anticipate a Sell Short day for Friday. A failed rally above our reference price gave us a good short sale signal at the open to catch the morning selloff.
After making a two week low (and threating the 200 day SMA) early on Wednesday, the eMini S&P futures rallied for the balance of the session, a textbook TTT Buy day (I wrote about that HERE). This rally saw upside follow through on Thursday, again closing near the high of the session (I often characterize a day as bullish or bearish by where the market closes within its daily range- bullish days close near the session high, bearish days tend to close near the session low.)
This two day advance meant that on Friday the TTT would have us anticipate a Sell Short day, characterized by an open near the session high and a decline to close near the low. For the trade entry we would normally look for a failed rally above a “reference price”. A reference price is often the previous session high- the level that marked where “too high” was in the previous session. Other times a market doesn’t reach a previous day high; when this occurs we need to look for an alternative level to watch.
Thursday’s high was 2677.50; this was our standard reference price for today’s Sell Short day trade. I wasn’t sure the market would reach that high today so in this morning’s note I suggested we watch 2675.50 for our reference price; this was at the last premarket high.
The 8:30 AM open was 2672.25 and within the first five minutes there was a failed rally (reached 2676.25); the subsequent selloff was our first trigger for a short sale. If you missed the first sale, you got a second chance about 10 minutes later on another failed rally above the reference price. The lower high of this second rally gave us confidence if we wanted to take the next setup.
Our initial stop loss would go above the session high – if the market made a new high after our short sale then the market no longer had the bearish momentum we were looking to ride. A quick selloff followed this morning, with the market making a session low of 2657.50 just before 10 AM, for a move of about 18 points. From here, the market started making a series of higher lows and higher highs, which told us to stay away from new shorts.
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 TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.