In today’s edition of Swing Trader’s Insight, I labeled the soybeans as being on a Taylor Trading Buy day. It traded lower last night; this added to my confidence in the signal because the Monday day session for the grain markets often reverse the move of Sunday nights.
Friday was a down day for the soybeans as they sold off out of a breakout setup made on Thursday. Friday was a classic TT Sell Short day as the market opened near the high of the session and then moved lower to close near the daily low. In turn, Friday’s bearish session told us to anticipate a TT Buy day for Monday.
On a Buy day we look for the market to make an initial move down, trading below the low of the previous session. This selloff serves to shake out weak longs and get new (late) sellers to short down at a bottom.
This selloff is our cue to look for a subsequent rally; we go long when the market trades back above the previous day low. This puts pressure on the new shorts and adds momentum to the rally.
July soybeans sold off on Sunday night, moving below the Friday low to a session low of 848-2 and making a night session close of 850-4. We would look for two potential trade triggers. First, we would buy on a rally back above the Friday low of 855-0. Second, we would buy after a successful test of the overnight low of 848-2.
The 8:30 AM open was 850-4 and the market quickly rallied above the Friday low, triggering our long entry. As always, I like to enter trades on stop orders when I can; it helps me preplan my trades to prevent emotional trading decisions. The initial stop loss could go below the day session low of 849-2 or the next low of 852-6.
Beans trended higher over the morning; stops could be raised in conjunction. An 11 AM double top at 866-0 was a signal to take profits or at least tighten up stops.
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