In this morning’s comment for the EMini S&P, I noted that it had two setups for today. These two setups anticipated the market moving in opposite directions. Luckily, we didn’t have to guess as to the move’s direction, we let the market decide and go with it.
First, by a Taylor Trading cycle count today would be a Sell Short day, which would be a failed rally above the previous day high and then a subsequent selloff. We would look to short when it fall back below the previous day high.
The other pattern was a breakout setup, as Monday was an NR4 day. For this pattern we would look to go long when the market traded above the previous day high, looking for that to be the kickoff to a larger move in that initial direction.
I usually like to trade stock indices during the stock exchange hours, looking to take trades after the 8:30 AM CT open. Sometimes trading the premarket session gives you a head start on a day session move but I find that more often the premarket makes fake out moves and the day session often gives you a second chance to catch moves that are missed earlier.
For the June EMini S&P, the 8:30 AM open was 2915.50. It fell to 2912.75 before rallying back above 2915.75, the Monday high. This rally was our trigger for a long entry for the breakout trade, which got us in about five minutes after the open. It never dropped back below the Monday high, so the Taylor Trading short was never triggered.
For our long position, the initial stop loss could go below the day session low of 2912.75. For a breakout trade, we want to hold our position as long as the market momentum is in our favor, and breaking the low would be a signal of a momentum reversal.
The market has trended higher over the morning. The recent high of 2923.50 was a pivot point to watch; clearing it gave the market new fuel for the rally. As we are into new high territory I would continue to trail stop losses higher as there is no old price level to view as a target.
Subscribe to Breakout Futures Trading Guide
Breakout Futures Trading Guide - Written by veteran futures trading professional Scott Hoffman, Breakout Futures Trading Guide explains the exact chart patterns you can use to identify futures markets that may be set up for trading sessions with large directional moves the day before they happen!
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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.