According to the Taylor Technique, today was a Sell Short Day for the 10 year T Note futures; actually for all along the Treasury curve. I was watching Ten Years today.
Monday through Thursday last week saw bearish action; the open was higher than the close for those four sessions. Friday was the TT Buy day; the close higher than the open is evidence of this. Yesterday was the Sell day; it exceeded the Sell day objective at 118-08.0 (there also was the opportunity for a Power Buy yesterday; you can read about the Power trade setup here).
After two days of bullish action, today was the Sell Short day. For a strict TT Sell Short day we use the previous session high as the reference price for the sale. If the market doesn’t trade to the previous session high, we look for other potential short entries.
In the daily chart below, the trend line connecting the two recent swing highs came in at 118-10.7. I was watching this for a place for a short sale. Trend lines like this are significant. They show where a market has previously stopped a move; a breach of the trend line indicates a change in market dynamics.
That trend line was never reached today, although it did get close early last night. The next short sale point to consider was at 118-07.3 (rounded down to 118-07). This is a 50% retracement of the selloff from the Feb. 5th high. As with the trend line, this point was taken out last night, so it wasn’t much help for today.
The next point to consider was around 117-30. 117-30.8 is a 50% retracement of the rally of the Feb. 11th low, and 117-30.3 was the trend line connecting the 2/11 and 2/16 lows.
While I was writing the morning watch list this morning, I was watching for a break below 117-30 for a short sale, but it never traded down far enough to be a legitimate sell signal – a half tick isn’t enough. They rebounded and spent most of the morning above there.
The speech by Philly Fed President Plosser proved to be the catalyst for the decisive break around 11:45 AM, and gave us our short sale. The 1 PM release of the Treasury budget statement and FOMC meeting minutes gave it the final push. The selloff stopped at the 2/11 low at 117-16.5, giving a reason to cover shorts. Looking to tomorrow, we should be anticipating a Buy day.
The Taylor Technique can be a useful tool for swing trading. Some tape reading skills can help you find trades for days when markets don’t reach their ideal TT ‘reference prices’.
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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