I thought I’d follow up on this morning’s post about the breakout sale in the eMinis. Actually, going back to yesterday, I wrote about one of the bedrock principles of swing trading is discipline-to wait for the right setup, or “play”, as Taylor would say. So what was the “swing trader’s” plan for today?
Thud, then flatline
The primary play was to trade the breakout that occurred after the stock market open. As I laid out in the previous post (see here), the past two day’s narrow range and Doji bars gave us today’s breakout setup. Playing this breakout setup was the main play for the day. The market rewarded us for anticipating the breakout action. From the breakout points of 1100.00 to 1097.75, S&Ps broke to an initial intraday low of 1087.75 in ten minutes. In the 10 minute chart below, the rejection of the new lows around 9:50 to 10 AM was a sign to cover shorts-the bearish momentum was done for the time being.
From that point S&Ps traded sideways for much of the rest of the session, with a slight upward bias. I was watching the first bounce high at 1092.75 as a potential upside breakout point for the rest of the session, as a rally would pressure the too-exuberant bears who sold in the hole on the morning break. Likewise, a break of the intraday lows at 1087.75 and 1086.50 would have meant that the bears weren’t finished. A break of either end could have led to a move worth trading.
It turned out that there really wasn’t much of anything to do for the rest of the session. From 8:50 to nearly 2 PM they traded in approximately a 6 point range-too tight unless you are trading off 3 minute charts, which isn’t my style. The 1092.75 high was taken out decisively around 2:40 PM, but it was too late to generate much follow through higher.
Sometimes the best position is to not have one. If the market doesn’t follow your metal map, it’s better to stand aside than to try to force trades on marginal setups. In times like this, trading discipline can keep you from sabotaging your trading.
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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