FOMC meetings are a good example of times when markets may show breakout setups and subsequent breakout moves as traders will trade cautiously ahead of the meeting and then take positions after the meeting statement is released when traders then have more complete information to base trade decisions. Today’s Fed meeting was no exception to this pattern.
Around 12:30 PM CT today I sent out a note to Swing Trader’s Insight subscribers suggesting we look for breakout trade opportunities in the stock index futures, notably the eMini S&P and the eMini Dow, along with the T Bonds and crude oil futures. All these markets had shown sufficient range compression and balanced profile to make them candidates for potential breakout moves.
After the FOMC announcement at 1 PM, the stock indices, bonds and crude oil all rallied. Crude oil was able to make a small move above its previous session high (the level I suggested watching for a long side breakout trade) and a small rally followed.
In contrast, both the eMini S&P and the T Bonds were unable to move above their session highs, and both formed double tops at those levels. The double tops were strong evidence that the market wasn’t likely to push higher and raised the odds of a downside move later. Bonds retreated and then meandered for the remainder of the session and I didn’t see any trade opportunities for the rest of the afternoon.
The eMini S&P was a more likely trade opportunity as the session low of 2640.25 was relatively high, and it wouldn’t take a large move to push below it for a downside breakout trade following the failed rally. Around 2:20 PM we got the break of the session low, which triggered our short sale. This break saw strong follow through for the remainder of the session, reaching 2627.00 by the 3:15 close and then a few points lower in the aftermarket.
When I started in the futures business, one of my trading mentor’s favorite sayings about trading was “If the door isn’t over here (he would point to the left), it has to be over there (as he pointed to the right). What he meant was if a market didn’t go in the expected direction, it was likely to go the opposite way. When trading breakout setups, keeping a balanced opinion of a market’s likely direction of movement can often result in trade opportunities that you might miss if you had an opinion as to direction.
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.