There are a number of interesting charts today.Many recent market moves were driven by moves in the US Dollar; today’s follow through rally and upside breakout in the Dollar have caused some big moves today.Let’s start by looking at the S&P 500 Futures.
In last night’s Swing Trader’s Insight newsletter I labeled today a breakout day for the Spoos.Friday’s range was the narrowest of the previous four sessions; this is one of the patterns that signal a breakout setup.A breakout setup is significant.A range contraction indicates indecision on the part of traders, and the market pauses as the bulls and bears won’t commit.As the market begins to move out of its narrow range, the move may become self reinforcing and extend itself in the direction of the breakout.
This is the type of move we have in the S&Ps today.When I recognize a breakout setup, the next step is to find a breakout point; a point on the chart where if the market moves through it, it is likely to extend.
For breakout trading I use my Trade or Fade service for this. The ToF downside breakout point was 929.53 today. If you don’t get ToF there were some good chart points today. My original breakout trading system used previous day’s high and low; this would have given a sell point at 931.25.I would have also considered the flatterer of the two trend lines; this was at 926.67.
For profit targets, ToF targets were 920.50 then 908.50.On the chart, there was last week’s low of 921.25.Next is the Fibonacci retracement level at 912.88.‘
Recognizing breakout setups helps me anticipate market moves, and anticipation helps me have the confidence to act on signals.Let me know if you have questions about this method.
Well, they’re done trading sideways.
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