Today’s Post Holiday Trade in T Bond Futures

by Scott Hoffman on September 3, 2013

Three day holiday weekends can pose special situations for traders. Given global and electronic nature of today’s markets, we often see market moves on days we aren’t trading. If you come back from the holiday anticipating market moves to occur off the pre-holiday setup you may find yourself a day late.

As I wrote in this morning’s Swing Trader’s Insight watch list, the Labor Day holiday meant the markets had yesterday’s holiday trading session to react to Obama’s Saturday announcement that he would seek professional approval before acting against Syria. This kind of news often causes emotional trading behavior, which make for great trade opportunities for those that know what to anticipate.

In this case, the holiday meant much of the emotional reaction occurred yesterday. This meant today we were likely to see either a continuation of yesterday’s action or a reaction to the initial reaction. Either way, if you were looking to trade off the initial reaction to Saturday’s news, you were likely too late, which meant you would likely be on the wrong side of trades.

The T Bond futures were on a Taylor Trading Technique Sell Short day signal for today. This turned out to be a good call; the lower geopolitical tension and good overnight data pushed T Bonds lower on Monday into Monday night. So what did last night’s selloff leave us with for a trade setup for today?

ZBZ daily Sept 3 300x198 Today’s Post Holiday Trade in T Bond Futures

The chart looked like it was primed for additional downside action. Dec. T Bonds were trading around last Thursday’s low of 130-13, which was also support from the August 2 low of 130-12. Additionally, 130-09 was a 50 percent retracement of the rally from the August 22 low to last week’s high; a drop below that level would be confirmation that the selloff was resuming.

We had a confirmation price level to watch this morning (130-09). We also had two specific times to anticipate that the market might see a catalyst for another move- either the 8:30 AM stock market open or the 9 AM release of the August ISM manufacturing index, the only US data of the day.

ZBZ intraday Sept 3 300x198 Today’s Post Holiday Trade in T Bond Futures

The stock market open didn’t do anything to move T Bonds as they stayed stuck in the area around Thursday’s low. That left the ISM release at 9 AM; we would look to get short on a break under the 130-09 Fibonacci retracement support.

The ISM report did come in stronger than the average forecast; this led to the next break in bonds. The move under 130-09 triggered our short sale, with the initial stop loss above the last swing high of 130-18. The session low of 129-11 was reached by 9:55 AM; at this point you could either take profits or trail down stop losses to limit risk and lock in profit.

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.

THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CONTRACTS CAN BE SUBSTANTIAL. THERE IS A HIGH DEGREE OF LEVERAGE IN FUTURES TRADING BECAUSE OF SMALL MARGIN REQUIREMENTS. THIS LEVERAGE CAN WORK AGAINST YOU AS WELL AS FOR YOU AND CAN LEAD TO LARGE LOSSES AS WELL AS LARGE GAINS.

STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE.  IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A ‘’LIMIT MOVE’’, IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.

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