Yesterday I was going to write a post about the breakout setup sale in March Silver futures, but today was equally interesting, so I’m glad I waited (Reminds me of that Demotivators poster: “Hard work often pays off after time, but laziness always pays off now.”)
The daily chart for March Silver futures is below. Monday was the bar that generated the breakout setup; I drew a green circle around it (It was a doji and an NR7). This meant that for yesterday, we were anticipating a breakout, directional move; we use the previous session high and low as entry points for breakout trades.
click to enlarge
Note also the green dashed line at the bottom of the chart. It is the low from Dec. 22; the previous swing low and a price objective for the selloff. It was also a decision point for the trend.
Moving to a 60 minute chart (below), we see how yesterday developed. The two lines were price points for short entries for breakout trades. I used Fibonacci retracements of the recent rally for price objectives for the break (see the daily chart above).
As I frequently comment, breakout sales often lead to Taylor Technique Buy Days in the following session, as breakout moves often create the “excess lows” that mark a trend change. (For the basics of the Taylor Technique, read my post here.) That’s not always the case, however, and I anticipated follow through selling today. There were two indications for this. First, yesterday’s close below the 50% retracement level at 1723.5. Failure to hold the 50% retracement level increases the odds that a move is likely to continue. The second indicator was the close at the low of the session, indicating that it was likely that selling pressure was not yet exhausted.
click to enlarge
So, for today we were anticipating followthrough selling, with the 1723.5 low as the objective for a selloff. This is where it gets interesting. Selling pushed it below the old low at about 9 AM, but the downward pressure stopped there, and a short covering rally ensued. I initially thought that today would end up being a Buy Day, with the move below the 17.235 low as the “excess low” reference price. This rally failed to breach the midpoint of today’s range at 16.928, and has turned back down to trade on the lows again. If it closes around here, we will still have a Buy Day signal in place, and we may very well be using the same 17.235 price as our Buy Day reference price.
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. 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.
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