We had a successful breakout trade in cotton today; let’s take a look at it.
I identified today as a breakout day in December Cotton futures. Yesterday as an inside day, and Wednesday’s range was 60% of Tuesday’s range. This contraction meant a breakout, directional trade was likely today.
The daily chart below shows how I chose the prices at which I bought and sold. I bought at 59.80; that was yesterday’s high. When I bought, it had already traded through 59.80 and had retraced to it; I bought on that retracement. I set the initial stop loss at 5910, which was just below today’s low.
The downward sloping trendline is at 60.95 today; I chose to take profits at 60.90, just under the trendline, for a profit of $550 per contract. That trendline has only two points, so it’s tentative, but with the July high at 61.29 and a USDA report tomorrow morning, 60.90 seemed a prudent choice. If you’re still long, a close over the 61.29 high could lead to a retest of the June high at 62.63.
Good breakout trade
