This year my New Year’s resolution for trading was to concentrate more on trading breakout setups as market conditions seem likely to favor them – lots of surprises which in turn will tend to make traders more tentative and less committed in more uncertain market conditions.
The EMini S&P had a breakout setup for today – Tuesday was an inside day, a doji bar and it was tied for the narrowest trading range for January. These are all patterns I use to identify breakout trade candidates for my Swing Trader’s Insight advisory. This breakout setup was logical as we got Apple’s earnings after yesterday’s close and today we get the announcement from the FOMC meeting.
When a market has a breakout setup, we look for an initial move beyond a close by support or resistance level to be a trigger to enter a trade in that direction and then (if things go right) we get to ride a larger move as the market gains momentum and participation in the direction of the initial move.
When it makes sense I use the previous session high and low as trigger price levels to enter a breakout trade as those were the levels where the market saw resistance and support in the previous session. A move beyond one of these levels would be a signal that the market is ready to start a breakout move.
Today’s Trade Opportunities
Today for the March EMini S&P we could use the Tuesday high of 2650.00 and low of 2626.00. I like to enter these trades using stop orders just beyond the trigger price levels; that way I have my entry in place ahead of time and don’t have to scramble or guess as to how to enter. I also like to use the OSO (Order Sends Order) feature to automatically enter the stop loss when the entry order is hit.
Overnight the ES traded above the Tuesday high. Moves like these can complicate trading as sometimes the market just continues in the initial direction, leaving us to find a less advantageous price or just leaving us behind. Fortunately the stock indices often retrace overnight moves after the 8:30 AM stock market open.
That’s what we got this morning. The ESH opened at 2655.25, well above the Tuesday high of 2650.00. By 9 AM it sold off to 2646.50 and then it started back up. This next rally gave us our long entry. The initial stop loss could go below the day session low, and from there the market trended higher over the course of the morning. The market made a series of higher highs and higher lows over the morning, we could trail our stops higher to take lock in profits before the 1 PM FOMC announcement. It stalled just below the 2019 high of 2677.75; this gave us more evidence to take profits.
So as we were flat ahead of 1 PM, we could potentially look for another trade opportunity after the Fed. A more dovish tone in the Fed announcement gave the market the impetus for another move higher; the rally above the 2677.75 high gave a second trade entry if you were looking for more.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
© 2021 StoneX Group Inc. All Rights Reserved