In this morning’s comment for Swing Trader’s Insight (STI) I wrote that I would consider buying the EMini S&P if it rallied back above 2900. I’ve often said that Sunday night moves should often be faded; this was a good example of that guideline.
In last night’s edition of STI, the EMini S&P was labeled as a Taylor Trading Sell Short day, as Friday’s rally put the ES into the Sell Short day of the Taylor Trading cycle. This meant we would be anticipating the market would open at the session high and move lower, to close near the session low.
Today, however, was not a normal Sell Short day, as the market opened sharply lower last night and traded lower through the night and early morning. Such a big move lower, however, meant it was possible that the market would “use up” its downside momentum overnight. If this was the case, and the market started to rally, there would likely be a large number of trapped shorts who would be increasingly looking to buy (cover shorts) as the rally gained steam.
So for the day session, we would look to go long IF the market traded back above 2900 basis ESM, using this as a reference price for where the rally would be strengthening. The 8:30 AM open was 2897.50, and our long entry got triggered shortly after the open.
After our long entry was triggered, our initial stop loss could go below the day session open of 2894.00, and trailed higher as the market made higher lows. Watch 2916.50 and 2922.50 (Fibonacci retracement levels) as pivot points from here.
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.