Friday’s Futures Setups

Here’s the chart from yesterday, along with the comment:

I mention three things here: 1. oversold (see the stochastics), 2. the .382
retracement, and 3. the hammer on yesterday’s bar. It’s fairly easy to see these
things, but entry becomes a little more difficult. Here’s what I look at:

When I see a setup on the daily I always bring it down at least one time
frame. Let’s take a look at the 30-min chart:

First let me say that I’m an advocate of not trading the open. That’s
when the locals can clean you out, basically. Just hang out and watch. Use the
momentum indicator to spot divergences, and even draw trendlines on the
indicator itself. In this case, we open and just barely take out the high from
the 26th. But look at the divergence (A). This should be a warning that maybe
we’re not quite ready to go long yet. We’re getting close, as momentum is
increasing (B) and the 20MA is flattening out.

Just for kicks I threw in the same chart with stochastics. Divergence here as
well.

So what should you watch for?

Wait for the momentum line (A) to be broken to the upside. In this case, it’s
beginning to now. Also, stochs are improving — a good sign. Again, stay out of
the open — the first pullback after the momentum line is broken can be a
nice trade.

Please note that while there are strong trends, one bar or a series of bars
forming a setup can sometimes indicate a contra move for the next day. This
contra move may not be long-lasting — maybe only for a day or two. Trading with
the main trend is always the highest probability trade.


Be advised that some futures contracts are prone to gaps.