Earlier this morning I was going to write about shorting the eMini S&P’s. Yesterday was a Taylor Trading Technique Sell Short day. I did short them yesterday but ended up scratching the trade as they made a late rally to close with a gain.
The strong close pushed the Sell short signal over to today. Yesterday was the narrowest trading range in the previous four sessions, indicating a lack of commitment to buy at higher prices, giving more reason to anticipate a trade opportunity today.
Daily Chart
When I got in this morning I was wondering what to do with them. Yesterday’s high at 1176.75 was the TTT reference price. Around 7 AM they traded to 1177.00 – was that going to be it for the high violation?
I was busy writing the morning update and talking to clients so I wasn’t watching them too closely; I figured there would be other markets to watch. Around 8 AM the guy next to me said “Holy &*#@, look at the Spoos rally!” I looked up at the Twitter feed and saw the Buffett / B of A news. They took off, making a push over the overnight high.
I was wondering if the market would stay higher and move the Sell Short day out another day (maybe to coincide with Bernanke’s speech tomorrow). However, by the time we got to the stock market open it had made a high (at the 20 day EMA) and turned back down.
10 minute chart eMini S&P futures
As it turned back down it started to look more and more like a Sell Short day. I put in sell stop orders to go short at 1176. This order got hit around 8:50 AM. I put in the initial stop loss at 1182.00.
Within about 10 minutes of getting short they had sold off to 1168.50, testing support from the lows around 5 AM. At this point I covered a portion of the position and move the stop loss on the balance to break even.
About 20 minutes that low was taken out and it fell further, testing yesterday’s SS day reference price. At this point the decision is whether to take profits on the balance or continue to hold shorts. When to exit a trade is always the hard part for me – if you take exit a trade you miss out on potential further gains, but any time you get stopped out of a trade you have always given up some profit.
Getting back to the title of the post – if you bought eMinis this morning because of the Buffett / B of A news you would have been steamrolled this morning. I’m not saying the Taylor Trading Technique makes you omniscient or something, but I’ve found that the TTT often helps you follow the old trading maxim to “Buy the rumor and sell the fact”.
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.
