By the Taylor Method (read the basics here), today was a Sell day for the Euro Currency futures. As you can see on the daily chart below, it had bearish action Tuesday to Thursday last week (open higher than the close). Friday turned out to be the Buy day, using Thursday’s low at 1.3594 was the reference price for the Buy day; this was also roughly a double bottom with the 2/5 swing low at 1.3584.
On Friday, the break below Thursday’s low created the ‘excess’ that marked the end of the selloff. The subsequent rally back through 1.3594 was the buy trigger. That purchase saw a profitable close Friday, so long positions could have been taken home, looking for upside follow through for the following session.
click to enlarge
Today is the Sell day in the Taylor method cycle. A strict adherence to the Taylor Method would have you long coming into today’s session. The reference price for Friday’s long positions would be Friday’s high at 1.3695; this is the first profit target for long positions.
I’m cautious about going home with trades on ahead of a long weekend, so I came into today flat the Euro. How could we trade it today?
As would be the case if we were long, the reference price is Friday’s high at 1.39695, which is our price objective for the day. We could be buying today, looking for a rally to the reference price. Linda Raschke refers to this trade as a ‘Power Buy’. A market rallies on the Buy day, but sees profit taking at the end of the session, pushing it off the high. That sell off is a buying opportunity as we look for the bullish strength to reassert itself.
That is what happened today, as an overnight push to the old 1.3584 swing low gave another opportunity to buy. From that purchase, we have the same rally objectives – first at Friday’s high (note there was also trend line resistance at 1.3586) then the trend line off the recent highs; this comes in at 1.3726.
In the Taylor Technique, the Sell day is kind of a misnomer. Recognizing the potential two sided opportunity on Sell days give you additional trading opportunities, allowing you to take advantage of setups even when you don’t carry trades overnight.
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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