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Bulls Want Strong Entry Bar after Friday’s Buy Signal

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Trading Update: Tuesday December 27, 2022

Emini pre-open market analysis

Emini daily chart

  • Last Friday (December 23rd) formed a second entry buy on the daily chart at the 50% pullback of the two-month rally that led to the December 13th high.
  • The bulls want strong entry bar today that will increase the odds of a second leg up and a rally to the December 6th low.
  • The December 21st rally was strong enough to increase the odds of buyers below December 20th.
  • Since the daily chart was in a trading range from November 15th – December 13th, it was reasonable for bulls to buy the December 6th low and scale in lower. A logical scale in location is above a bull bar closing on or near its high, especially if it is a second entry buy like December 23rd.
  • Some of those bulls who bought the December 6th low and more above a bull bar like December 23rd will be disappointed enough that they will exit breakeven on the entire trade, which would be around 3,912 or just under the December 21st high.
  • The bears will see any rally as a pullback from the December 13th selloff. The bears will see a rally up to the December high as a two-legged pullback where the second leg went below the first leg (December 20th). This means some bears will look to sell above the December 21st high.
  • With only four trading days left in the year, traders should assume that the upside and downside will be limited, and the market will likely stay between the December 22 low and the December 6th low.
  • Since 4,000 has been a magnet all year, the market may test it. However, it might be too far away to get to before the end of the week.
  • Overall, traders should expect a rally over the next few days, testing the December 6th low. Traders will pay close attention to today’s entry bar to see if the bulls will get a strong bull bar closing on its high or if the bears can disappoint the bulls and prevent a strong bull close.

Emini 5-minute chart and what to expect today

  • Emini is up 2 points in the overnight Globex session.
  • The Globex market has been mainly in a trading range since yesterday’s open.
  • The bears got a downside breakout on the 5-minute chart at 5:40 AM PT making the market Always In Short. This bear breakout is strong enough to increase the odds of a couple of legs sideways to down at a minimum.  
  • The bulls want a gap up during the U.S. Session and for today to be a strong bull trend day, creating a strong entry bar on the daily chart.
  • As always, traders should expect a trading range open and for the market to have a lot of limit order trading. As I often say, this means most traders should consider not trading the first 6-12 bars.
  • Traders can also wait for a credible swing trade in the form of a double top/bottom or a wedge top/bottom.
  • The most important thing to remember on the open is to expect a lot of trading range price action until there is a clear breakout with follow-through.
  • It is common for the market to have big breakout bars that look like they will lead to successful breakouts, only to fail and reverse directions.

Emini intraday market update

  • The Emini sold off on the open and tested yesterday’s 8:05 AM PT low.
  • The bears tried twice to get the downside breakout below yesterday’s 8:05 AM PT low but failed, and the market reversed up, trapping the bears who sold low in a likely trading range.
  • The bulls want an upside breakout of last Friday’s range and for the day to close on its high.
  • I am typing this at 7:45 AM PT, and at the moment, this looks good for the bulls; however, the bulls need to get an upside breakout soon, or else a trading range will be more likely than a strong bull rally.
  • With the selling pressure on the first 4 bars of the day, it will likely limit the upside.
  • Typically, bull trends do not have a lot of selling pressure on the open. This means trades should expect a trading range to continue and for the bulls to be disappointed with the rally that began around 7:00 AM PT.
  • A trader should be open to a possible 50% pullback from the rally that began on bar 7. This would likely allow bears who sold the low of the day and scaled in higher to avoid a loss. Remember, trading ranges are typically forgiving for traders who use wide stops and scale in.
  • Traders should pay close attention to the open of the day as the market is going sideways at that price level.

Friday’s Emini setups

Emini 5-minute Bear Trap Then Spike and Channel - Bulls want strong entry bar to follow.

Al created the SP500 Emini charts.

Here are several reasonable stop entry setups from Friday (before Christmas break). 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

EURUSD Daily Stalling above Moving Average
  • The Emini is stalling just above the moving average and will likely be unable to escape reaching it in the next couple of days.
  • Today’s high came within ten pips of the December 13th close and sold off. This is a sign of disappointed bulls selling out of longs back at the December 13th close.
  • If the bulls thought the market would go a lot higher in the next couple of days, they would not sell during the retest of the December 13th high close.
  • The bears will see today as a failed breakout of the 7-day tight trading range. They want to trap the bulls and get a downside breakout that will test the moving average and the December 12th low.
  • Overall, traders should expect a second leg down to the moving average over the next few days.

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

Emini sell climax with High 2 micro double bottom and bull trend reversal but cup and handle buy signal led to trading range instead of major trend reversal

Al created the SP500 Emini charts.

End of day video review

 

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

    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.

    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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