In last night’s Swing Trader’s Insight update I labeled the S&Ps as a breakout setup for today.  This was based on yesterday being a doji bar with range contraction-Monday’s range was 45% of Friday.

When I identify a breakout setup, I’m looking for an intraday directional move-looking for close in support or resistance to be taken out, and then for this breakout to serve as the springboard for a bigger move in the direction of the breakout.

One of the first spots I look at for potential breakout points are the previous day’s high and low.  As they were the points that stopped the market the previous day, they often are important chart points for the following day.  The importance of these points is why I list them on the nightly STI sheet.

The chart below is a 5 minute chart of the Sept. eMini S&P for today. Yesterday’s high was 1035.00; I drew this as the green line on the chart.  They were trading roughly unchanged, then rallied at 9 AM following a strong consumer confidence number.  This rally took them over 1035.00, which likely triggered buy stops to take them to the high of the day at 1038.00.

The rally was unable to hold, however, and the retreat back through 1035.00 brought in selling as the breakout traders liquidated.  This pushed them back to the day session low at 1026.50.  The low held, forming a double bottom.  Holding the low allowed the selling pressure to dissipate.

I’m still bullish on the eMinis today.  The midpoint of today’s session is 1032.25; regaining that should help the bulls.  Additionally, I’ve often found that the “second push” through a breakpoint point results in a trade with good follow through, so I’d watch for a potential upside breakout for today.

eMini 5 minute chart

eMini 5 minute chart

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