In this morning’s note for the EMini S&P futures, I suggested we might look to short the market if it the overnight rally failed. Friday had been a rally out of a breakout setup and I have long told my readers to be suspicious of Sunday night moves as they often reverse on Monday. This gave us a good trade today.
Friday saw a rally out of Thursday’s breakout setup (ID, NR4 on Thursday). This showed the classic breakout rally profile; it opened on the low of the session and then rallied above the previous session high, finally closing near the top of the daily range.
A breakout move is often taken back in the following session – the Sell Short day or the Buy day of the Taylor Trading Technique. This is because the move out of a breakout setup often “uses up” the momentum in that direction, and the following session takes back the first day’s move It also runs out the traders who got in on the second day in anticipation of follow through, who end up buying near the top or selling near the bottom.
The EMini S&P opened higher last night on optimism about Chinese trade talks. This put it up near 2814.00 the high of last week and of 2019. This gave us a “pivot point” to watch. The market would likely either remain above 2814 and then continue the rally or it would fall back down, if traders didn’t want to continue to “buy higher”. The gap higher open added to the significance of this level, and the 2814 high gave us a good reference price to discern where the market was going today.
The 8:30 AM open was 2815.50 with an opening range high of 2818.00. It started making lower highs and dropped below 2814.00 around 8:45 AM. This gave us an early shorting opportunity with stop losses going above either the day session high (2818.00) or the overnight high (2819.75). Either one turned out to be fine as the market quickly gained downside momentum this morning.
At 9:50 the market broke below the Friday high of 2808.25, which is the standard reference price for a Taylor Trading Sell Short day. By 11:15 AM it broke 2775.00, last week’s low. It continued to make lower highs and lower lows until finally finding a bottom around Noon Central.
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.
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.