Today was another session that the stock index futures had breakout setups. Using the overnight structure as I wrote about yesterday (read HERE), we were able to trade this morning’s breakdown although the market was well past the standard trigger levels for a breakout trade entry.
In 2017 I wrote a report (get a copy HERE) in which I said that Trump’s penchant for tweeting and commenting at random times meant we were likely to see a breakout and consolidation cycle in the markets as traders would become hesitant to get overcommitted to trades in quiet news times and then have an outsized reaction to news (like Trump’s tweets).
With the deadline looming for new US tariffs on China, stock indices consolidated on Wednesday after the volatility of Monday and Tuesday, giving us the indices breakout setups for today. At a rally last night, President Trump said: “You see the tariffs we’re doing? Because they broke the deal. They can’t do that, so they’ll be paying.”
This hardline comment threw more cold water on hopes for a last minute deal, and stocks sold off overnight and into this morning. By 8 AM, the June EMini S&P broker below the Wednesday and Tuesday lows, which would have been our standard short side breakout entry levels, and just after 8 AM it made a session low of 2852.00.
The 8:30 AM open was 2856.25- below the Wednesday and Tuesday lows, but above the 2852 overnight low. We could use the overnight low as a new breakout trigger level – a break below there would be a signal that the downside momentum was reasserting itself.
The short sale was triggered around 8:40 AM. By 9:25 it made a low of 2837.00, a move of 15 points in 45 minutes. At this point, tailing stops or taking profits would be prudent. It did make a slightly lower low about an hour later however following new comments by President Trump around 11:30, a major recovery rally occurred. This showed the wisdom of taking profits while you have them in these current market conditions.
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.