By the Taylor Trading technique, silver futures were on the Sell Short day of the TT cycle. Normally we would watch the previous day high as our “reference price” for a trade trigger; today we used a different setup to get short.
In last night’s Swing Trader’s Insight, silver was labeled as a TT Sell Short day. For a standard TT trade setup we would anticipate a failed rally above the previous session high with the move back below the previous high as our trigger for a short sale. As the market never reached the previous day high, we needed to look for a different setup if we wanted to short it.
When I was reviewing charts for the morning note for STI, I noticed that December silver showed extreme range contraction from Tuesday to Wednesday – Wednesday’s range was 46% of the Tuesday range. This gave the market a breakout setup – range contraction is one of the sets of patterns to look for when a market has a breakout setup.
With this in mind, my morning comment for silver was “TT Sell Short day, yesterday’s range contraction gives breakout move potential today. Use the Wednesday low of 1928 as the downside trigger level.” Specifically, we would short the market when it broke below the Wednesday low.
I sent out the STI morning note after the first move below the Wednesday low so we missed the rebound move. We subsequently got short around 8:35 AM and placed the initial stop loss above the 19.370 high. Silver tanked this morning, breaking to a session low of 18.570 by 9:20 AM – a move of about 70 cents/oz.
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