Monday, January 9, 2017

January 6- Breakout Buy in EMini S&P Futures

The EMini S&P futures had a breakout setup for Friday, which made sense in light of the monthly employment report due today. The breakout setup gave a good trade for the day session after a fake out in the premarket.

Thursday’s bar for the S&P was an inside day, NR4 and a doji. These were all patterns indicative of a market lacking in conviction, which would be logical ahead of the monthly employment report. In keeping with the lack of directional clues, I approach breakout days willing to take a trade in either direction- let the market decide which way it wants to go, we go along for the ride. ( In this morning Exclusive Advisory I noted ROC was bullish- something to give confidence for the long side.)

For today’s trade, our upside breakout reference prices were the Thursday high of 2266.00 and the Wednesday high of 2267.25 – we would look go to long if the market traded above these price(s).
I suggest waiting for the 8:30 stock market open to take trades and today was a good example why. After the 7:30 employment report there were two moves above the Thursday high (double top at 2266.75) however this move lacked momentum and the market fell to a new session low of 2258.25.

This session low was made just after the 8:30 however it too lacked momentum, and the rally resumed. Around 9 AM it reached the Thursday high and 45 minutes later it began to move above the highs. Although they were all close, at this point I would use the premarket or Wednesday high as the reference price for an entry point, in order to have confidence in the uptrend.

The initial stop loss for our longs could go either below 2261.00 (the last swing low) or the session low. By 11 AM it reached the previous contract high at 2273.00, eventually making an intraday double top high of 2277.00.

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