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.
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