In last night’s edition of Swing Trader’s Insight (STI), the eMini S&P futures were labeled as a breakout setup for today. There were two distinct reasons to anticipate this. First, the previous two sessions had been inside days, indicating price compression. Second, today’s monthly employment report was a likely catalyst for a breakout trade as it often generates big directional moves in stock indices.
For the stock indices, I prefer to trade during the stock market hours of 8:30 AM to 3:15 PM CT. I have found that the premarket trade tends to see whipsaw moves and false breakouts and the market often resolves its direction after 8:30. Waiting to trade helps avoid aggravating volatility and keeps me free to trade higher momentum moves later in the session.
Although I wait for the day session to trade, the overnight / premarket market structure can be useful as it can give additional price levels to trade off of. For example, the standard breakout trade levels today for the June eMini S&P would be the Thursday low (2699.75) and high (2728.25). In today’s STI morning comment I suggested we watch the overnight high as a potential lower long trade entry level.
I suggested we use the overnight high because it was a level that, if exceeded, would show the market had new buying interest above a previous resistance level and a move still higher was likely. In this case, the overnight high (2723.25) would allow us to get long lower than the Thursday high (2728.25).
The 8:340 AM open was 2721.50 and the overnight high was exceeded in the first minutes of the session. The rally stalled at the Thursday high on the first move higher, it then retested the overnight high before rallying to a new session high. As the morning has moved on, the market’s ability to maintain trade above the Thursday high indicates further advance is likely as the session progresses.
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