By the Taylor Trading Technique, today was a Buy day for the eMini S&P futures. Tuesday was a breakout setup rally; yesterday was the Sell Short day that often follows. This occurs because breakout moves often create the ‘excess’ that marks the end of a move.
It is this ‘excess’ that gets people to do the wrong thing at the wrong time. For example, Tuesday’s big recovery rally followed in to early strength yesterday, but the rally stalled at Monday’s high, and the Sell Short day selloff followed. (See the daily chart below)
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That brings us to today’s Buy day. The usual reference price for a Buy day is the previous session low. The move below the previous session low is our ‘reference price’-the move below the previous low creates the ‘excess low’ and the move back above there is the signal that the trend has turned and our trigger for a long entry.
The intraday chart below shows today’s action. Last night saw the eMini open below yesterday’s low, by early last night they had rallied through yesterday’s low, pulling us into a long position. The initial stop loss was placed below the overnight low of 1055.50, giving the trade a risk of around 6 points.
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In last night’s STI newsletter I called 1063.13 a pivot point today. That level was a 50% retracement of the move from Tuesday’s low to yesterday’s high. I view 50% retracements as an important price level-holding it means that the initial move can still be considered valid; breaking indicates the trend has reversed and a return to the point the move started from.
I often get asked what to do after a move has occurred, as was the case this morning. I generally tell traders to be willing to look for other entries in the direction of the daily trend if you find an entry. You never know how far a trend will go, and we anticipate the trend to stay in place for the full session.
For profit targets for today’s entry, I had two targets. First target was yesterday’s high at 1089.50. Next target is at the 200 day SMA; it’s at 1096.86 today.
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.
