Bulls trying for upside breakout test of 3,800

Trading Update: Tuesday October 18, 2022

Emini pre-open market analysis

Emini daily chart

• Yesterday, the market rallied and tested last Thursday’s bull close.
• The bulls see last Friday as a pullback from the rally on October 13. They want the market breakout to the upside and reverse Friday’s bear breakout bar. At the moment, the market is trying for upside breakout test of 3,800.
• More likely, the bears have sufficiently disappointed the bulls, and the market will have to continue sideways for a couple of days.
• There will be some bears who sold the breakout testing 3,500 and were trapped during the strong reversal up (October 13). Some of those bears tried to minimize their loss on October 14 as the market tested the midpoint of the prior bar. If these bears are trapped, they could give up and buy back shorts which could start the upside breakout and test of 4,000 big round number.
• So far, the bears are failing to get the downside breakout, increasing the odds that the market will have to rally higher. The bears should not have allowed last Thursday’s rally to happen, as it will likely influence the next several days.
• Overall, traders should expect a rally sideways to up and eventually test the 4,000 big round number, but it could take a couple of weeks to get there.

Emini 5-minute chart and what to expect today

• Emini is up 70 points in the overnight Globex session.
• The market will have a big gap up. As stated above, this might be the start of the bears giving up and the market testing the 4,000 big round number.
• As always, traders should assume a limit order market on the open and sideways.
• Since the market is likely to have a big gap up, traders should expect a pullback and test of the moving average, followed by a rally. The market does not have to reach the moving average before a rally, but usually, the market has to attempt to test the moving average on the open when the gap is this big.
• Most traders should wait for 6-12 bars before placing a trade, as this will help them avoid the likely multiple reversals.
• Traders can always wait for a double top/bottom or a wedge top/bottom and wait for a credible stop entry.
• Lastly, traders need to remember that a big gap increases the risk of the bars being more extensive, so they need to ensure they are trading an appropriate size.

Yesterday’s Emini setups

Al created the SP500 Emini charts.

Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

EURUSD Forex market trading strategies

EURUSD Forex daily chart

• The EURUSD had an intense bull trend day yesterday. The bulls want this to be the start of the rally that tests the October 4 close and reaches the September highs.
• The bulls want this rally to lead to two legs up and a lower high followed by a test of the September low. The micro channel is a sign of strength and they want to have strong follow-through today.
• The bears want a lower high and selloff down to the September low.
• Overall, traders should expect sideways to up over next couple of weeks.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

Al created the SP500 Emini charts.

End of day review

• Today formed a bear trend from the open that led to a trading range day.
• The market formed a bear trend from the open however the bears failed to get consecutive strong bear trend bars during the first 5 bars.
• The market tried to form a wedge bottom around 7:30 PT, however, the channel down was too tight, and the bears got a breakout below the wedge and the moving average.
• The market formed a sell-the-close market down to the 8:30 low.
• The bulls formed an endless pullback that led to a test of the channel’s beginning (8:00 high).
• Since channels typically evolve into trading ranges, the market sold off, testing the day’s low around 12:00 and reversed up into the close.
• One thing worth mentioning is that when the market forms a wedge bottom and breaks below, it will often retest the initial breakout point as it did around 9:45 PM today.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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Trading Room

Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. Al talks about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com on trading room days. We offer a 2 day free trial.

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Charts use Pacific Time

When times are mentioned, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.

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