After last week’s volatility, many of the futures markets had a relatively quiet day yesterday. With the FOMC meeting today and tomorrow and then the October employment report on Friday, consolidation was the operative scenario for many markets yesterday..
Consolidation and the attendant range contractions is one end of the volatility cycle of markets. Volatility contractions presage a volatility expansion, and volatility expansions often result is directional moves. This volatility cycle is the basis for my Breakout Futures Trading Method. (Read the full story here.)
There were many markets that met my breakout signal criteria yesterday; let’s look at some of them. First, the chart below is the daily chart for the December S&P futures. Yesterday had the narrowest trading range of the previous four sessions, giving a breakout signal. An hour into the stock market’s session has not yet seen a breakout move; I would watch the current session’s high and low for breakout points.
Still waiting....
Next is the daily chart for the December Euro Currency futures. Yesterday had the narrowest trading range of the previous four sessions. I drew an arrow to 1.48715; it was a 50% retracement of the recent selloff. Breakout points for a sale today were yesterday’s low of 1.4700, the Trade or Fade breakout point of 1.4694, then last week’s low of 1.4681. (Trade or Fade is my advisory for breakout trading signals and price levels).
Downside breakout
Lastly, below is the daily chart for the December Silver. It too had a breakout setup; it was an inside and narrow range day. In addition, a small channel had formed. I was watching the channel lines for breakout points today-they were 1672.5 on the upside; 1618.5 down. (The upside Trade or fade breakout point was 1676.2) Now that it has broken out up, rally targets are the Fib levels of 1690.5 and 1714.8. The first Trade or Fade profit target was 1704.9.
Out of the channel
For more information on trading breakouts in futures, check out my Breakout Futures Trading Method book 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.
