Around the clock trading has changed trading in breakout setups, as many breakouts occur overnight, especially for the currency markets. That’s why I send out the Trade or Fade advisory at night; I don’t normally trade overnight, but I have clients and subscribers who do, and overnight breakouts are as valid as those that occur during the US day session.
That being said, sometimes breakout moves in the currencies do occur during the US session. There was a good setup and trade in the Euro currency futures today; let’s go through it.
The daily Trade or Fade update and the daily chart for the Sept. Euro futures are below. Trade or Fade labeled today a Trade, or Breakout day, as Friday was an inside day and a doji. Both those patterns are indications of a market that is indecisive, and this indecision and range contraction is often resolved by a breakout, directional move. These are great patterns for short term traders, as they often end up making a big move in a hurry-exactly the kind of moves savvy traders look for.
Trade or Fade was looking for a breakout.
Good breakout setup on the daily chart.
The intraday chart for the Euro is below. Today I was watching two potential breakout points. The first was Friday’s low at 1.3106 and the other was the first Trade or Fade resistance at 1.3112. We look to go long when the market trades over those prices, anticipating that the break will be the springboard to a bigger move.
Strong rally this morning
That’s what the Euro did this morning. The two entry prices were hit around 7:30 this morning, leading to a rally of nearly 90 points in around two hours. The second Trade or Fade resistance at 1.3164 was a possible profit target for this move-I use the second and third Trade or Fade resistance points for profit targets.
Recognizing breakout setups in futures give you the help you recognize chart setups with the potential for strong moves in a short amount of time. This can both help you find trade ideas and help you avoid being blindsided by a runaway move against you.
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.
