I labeled soybean futures as a Taylor “Sell Short Day’ today.  The sell short day occurs at the end of a rally.  It’s the day where the excess high occurs, as the last bulls buy; the end of their buying the end of the buying auction mean a change in momentum and direction, as the trapped bulls start to panic and liquidate their now underwater purchases.

The daily chart of Jan. soybeans is below; I labeled the last three days so you can see the cycle of buy-sell (liquidate longs)-sell short days.  I also drew a circle around last night’s reading for the two period ROC indicator; last night’s peak was corroborating evidence of the sell short signal.

Today had a good sell short setup

Today had a good sell short setup

Below is a 30 minute chart for Jan soybeans; I delineated the past two day’s action.  I also drew an arrow to the opening bar for this morning’s session-early in the session it sure didn’t look like a good day to sell short!

Patience was rewarded for short sellers

Patience was rewarded for short sellers

As things turned out, it was a great day to look to get short.  The first half hour of the day proved to be a great bull trap, as beans rallied strongly above yesterday’s high and the overnight high.  This turned out to be the last gasp for the bulls.

Taylor preached to be patient and wait for your play.  On today’s sell short day we were looking for the market to come back through support and accelerate lower as the bull trap was sprung.  Two stops to have considered for a short sale were the overnight high at 999-6 and yesterday’s high of 996-4.

Taylor would have us go home short today, playing for follow through selling Sunday night / Monday.  For Taylor, the first target would be for the market to trade below today’s low.  Going back to the daily chart above, I’d look for a profit target of the midpoint of the recent rally; this comes in at 979-4.

Successful trading doesn’t necessarily involve active day trading, but by following intraday action and “tape watching”, a trader can find good setups where others don’t.

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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