Yesterday I showed you how you could have used the Taylor Trading Technique to identify and trade yesterday’s bottom and rally in Corn futures (read the post here). In that post I said that on a big range day liker yesterday I usually look to take profits on the day of entry. This morning the USDA announced the sale of 1.5 million metric tons of corn to an “unknown” country, likely China. That is a big sale and good news for corn bulls.
This meant we were kicking ourselves for not staying long, right? Yes and no. It was higher overnight and opened higher this morning, but this morning’s open marked the high of the session and provided a good short sale opportunity.
Below is the daily chart for May Corn futures. Yesterday corn had a strong Taylor Trading Technique (TTT) Buy day as it bounced off Fibonacci retracement support at 675-0. This rally pushed it over the previous weekly high at 698-4.
That was high enough!
The intraday chart below shows the overnight and today’s action. After opening about unchanged from yesterday’s close, it rallied steadily through the night, closing the overnight session at 713-0. The USDA announced the big export sale about a half hour after the overnight so traders had about an hour and a half to digest this news.
Buy the rumor, sell the fact
For many traders the first impulse would be to buy the morning session (9:30 AM) open – after all, the market got good news, right? After yesterday’s big rally the TTT told us to be looking for a potential short sale.
The blue vertical line divides the two sessions. The 9:30 open was at 717-2, gapping about 4 cents higher than the night session close.
The open proved to be the high of the session as the buying dried up. Within five minutes it fell to fill in this gap. The 713-0 area was the first short sale as the morning’s trapped longs started to sell out (Sound familiar? I think we’ve all done this one once or twice). By 20 minutes into the session it fell through yesterday’s high, the “classic” price for a TTT short sale.
Twice it tried to rally back up off yesterday’s high, the lower highs showing the waning bullish momentum. The third break below yesterday’s high proved to be the decisive move as it traded lower to the first downside objective at 696-5 (This was a 50% retracement of the move from yesterday’s low to today’s high). I’d see the next downside objective at 688-2, the red up trend line on the daily chart.
So sure, had we held yesterday’s long positions overnight we could have extracted more profit out of that trade. However, as I would be coming into today’s session looking to sell short I thought it made more sense to close out with a profit, avoiding the overnight risk. This also left me in a flexible position for this morning, able to take advantage of this morning’s short sale opportunity.
Remember, the first job of a trader isn’t to make money; it’s to not lose money. Preserving equity keeps you in the game to take advantage of the good setups when they come along, and there will always be another trade coming along.
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.
