Grain futures had a down day yesterday, pushing corn and wheat futures down to critical support levels. Today they had a huge rally – corn futures made a $1362.50 per contract rally from today’s low to high; wheat made a $1787.50 per contract move from yesterday’s low today’s high. The Taylor Trading Technique (the basis of my Swing Trader’s Insight newsletter) gave a heads up to anticipate today’s rally and would have enabled you to take advantage of much of this move.
Below is the daily chart for May Corn. Today was the Buy day in the TTT cycle. On a Buy day we anticipate early session weakness followed by a rally as the trend turns up.
Now that's a Buy day!
The TTT has the useful concept of a “reference price”. A reference price is like a pivot point; a price level which when exceeded is likely to result in a trend reversal. For a TTT Buy day we often use the previous session low as the reference price.
The intraday chart below will help you visualize how a Buy day works. The morning session open saw corn futures open above yesterday’s low. The initial move was down, under yesterday’s low, likely sucking in short sellers who were looking for a downside breakout below support.
good intraday trend
This initial break proved to make the low of the day as the selling dried up. The resulting move back over yesterday’s low marked a trend change to bullish; this was our trigger for a long entry. After buying stop losses would go below today’s low. If it went back down and made new lows it would mean that the down trend had not yet ended, so we would exit, to cut our losses and to play for a better long entry later.
As the TTT was initially written up back in the 1950’s we would take these long positions home on the day of entry, looking for upside follow through in the next session. (By the TTT the profit objective for tomorrow would be today’s high). With today’s nearly around the clock electronic trading and faster flow of information the TTT cycle timeframes have shortened up as traders are quicker to enter trades and lock in profits if they catch a good run.
For this reason I generally look to take profits on the day of entry, especially for trades that catch a big move. A larger move on day of entry means a market is more likely to reverse its trend in the following session. Looking back up at the daily chart there were three upside price levels of interest for profit targets for today. The first was the down trend line connecting the March 4th, 21st and 23rd highs. This trend line proved to be another “pivot point’; the move over there served as a springboard to continue the rally. Additional profit targets were at yesterday’s high then Monday’s swing high. Any of these points were good “reference points”.
The Taylor Trading Technique helps you trade “in sync” with a market. As a trading tool the TTT can help you anticipate and identify trend changes soon after they occur. Doing so increases you odds of finding low risk, high reward entries.
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.
Pingback: Buying the Rumor, Selling the Fact in Futures Trading