How To Trade A Pullback
September dollar index futures
(
DXU1 |
Quote |
Chart |
News |
PowerRating) rallied for a second day out
of a Pullback From Highs
setup. One of the classic ways to trade pullbacks is a method developed by Jeff
Cooper in his Hit And Run trading books. In these setups, you wait for a momentum
market to hit a new high and pull back. In Cooper’s Pullback From Highs method, you
look for a market to pull back for three or more days. You then look to enter the
market above the high of the low-bar pullback bar. That becomes
your trigger. The dollar index has pulled back for four days. On day four, the
DXU left the additional signal of closing on its high after testing lower,
leaving a tail. The contract rallied yesterday and is continuing higher
today.Â
Use the prior day’s Futures Indicators lists to determine
Momentum. The DXU was on the Momentum-5 List as recently as June 12. Basis June
closed up .67 at 119.38.
Failing against the dollar is the currency futures of the
region which is the largest trading partner with the US. Euro FX futures
(
ECU1 |
Quote |
Chart |
News |
PowerRating)
and
Swiss francs
(
SFU1 |
Quote |
Chart |
News |
PowerRating) gapped below Pullback From Lows
setups, losing .00680 and .0040, respectively. Since these contracts closed
below the mid-point of the June 14 expansion bars, this resumes the argument for
a test of a new lows. Hurting continental currency futures was data out yesterday
showing Europe had its biggest up tick in inflation in months. That European
data also showed that manufacturing declined for a second straight month,
highlighting a situation of slowing economic growth and rising prices, an
environment that reduces the likelihood of further ECB rate cuts in short-term
interest rates, a negative for continental currencies.Â
Pork contracts spiked and accelerated.
August lean hogs
(
LHQ1 |
Quote |
Chart |
News |
PowerRating) are the leading contract on the Momentum-5
List and rallied to close at a contract record, up .375 to 67.200.Â
August pork bellies
(
PBQ1 |
Quote |
Chart |
News |
PowerRating) went out on their
highs of the day, up their daily limits in an outside-day formation. This
morning’s Pre-Opening
Agriculture Outlook pointed out that yesterday’s Commitment of Traders
report is in a “classic bullish setup,” although a bit overbought.
Bellies are also on the Momentum-5 List.
July sugar
(
SBN1 |
Quote |
Chart |
News |
PowerRating) hit a New 10-Day
High yesterday and is continuing higher today after testing yesterday’s low.
The contract left a bullish tail at a new 15-day high. This contract also
remains in a Multiple Days Low
Volatility
setup after the early June consolidation, suggesting the likelihood of a
larger-than-normal move.Â
Coffee
(
KCN1 |
Quote |
Chart |
News |
PowerRating)Â is giving back all of
the gains from the past six days’ rally triggering a Pullback From Lows
setup to close down 3.40 at 57.55.