Emini bulls want follow-through and second leg trap

Trading Update: Tuesday April 26, 2022

Emini pre-open market analysis

Emini daily chart

• Yesterday was a strong bull reversal bar on the daily chart.
• Emini bulls want follow-through today, hoping yesterday will lead to a second leg trap.
• They want a reversal up to close the gap at the April 18 low and ultimately get above the April 21 high.
• It is a credible swing buy above; however, last Thursday or Friday are strong enough that the market may get a second leg down.
• Yesterday’s bull bar is a problem for the bears and is a sign of disappointment in a trading range.
• Some bears will exit here and look to sell higher due to the risk of a second leg trap.
• The selloff to April 18 is a wedge bottom, and last Friday was a bear breakout below that wedge bottom. In general, when there is a credible bottom (April 18), and there is a bear breakout below the wedge bottom, there is a 50% chance the breakout fails and gets bought.
•  This means some bulls may use a wide stop, such as a measured move down from the March 29 high to the April 18 low. Those bulls would wait for a stop entry to buy more above a bull bar.
• As strong as yesterday’s bull bar is, the odds still slightly favor a second leg down from the 2-bar bear breakout last week. It is important to note that the second leg down may only last a few bars and sets up a micro double bottom with April 25.
• The bulls want yesterday to lead to a higher low major trend reversal, and while it is possible, the bulls will likely need a micro double bottom.
• The bear see yesterday as a pullback from the two bar bear breakout.
• Overall, the market is deciding if we will get the bear breakout of the February – March trading range and measured move down. Otherwise, the market will continue sideways and possibly up.

Emini 5-minute chart and what to expect today

• Emini is down 24 points in the overnight Globex session.
• The bulls hope today will be a strong bull trend day, which would be the entry bar following yesterday’s strong bull reversal bar.
• Today will likely disappoint the bulls and not lead to a strong entry bar and be a trading range day.
• Traders should be open to the possibility of a trend from the open. If today is a strong trend from the open, traders need to enter at least a small position to get in with the market.
• More likely, today will lead to a limit order open. If one is not comfortable with limit orders, wide stops, and scaling in, they should wait for a credible stop entry or clear breakout with follow-through.
• On the open, it is important to be cautious. The open often have been moves that often reverse. This can cause a trader to take a large loss on the open and cause a trader to have to fight the whole day to get back to breakeven.
• 50% of days have a major reversal of the initial move, so most traders are better off waiting for 6-12 bars before taking a trade.

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

• Yesterday closed as a bear trend bar closing on its low below the March – April trading range.
• At the moment, the market is Always in Short, and the bears hope today will be follow-through from yesterday’s bear breakout bar.
• The bears ultimately want to get down to the 2020 low (green line), 30 pips away (1.0636). This selloff may just be a sell vacuum test of this support level.
• The market is close enough to the 2020 low. It will probably have to reach it before the bulls get a credible bounce. If the market does bounce before reaching the 2020 low, traders may hesitate to buy without reaching the lows. This is because traders often want to buy near to the support level, and if it bounces before it, traders may not be willing to buy until it reaches the magnet.
• There is also a measured move projection based on the March 31 – April 5 bear breakout that projects down to the 2020 lows (green line).
• As strong as the bears are here, the bulls have been making money at every new low and will likely make money buying here as well.
• While the bears may get a measured move down from the March – April trading range, it is not likely. The odds are the March – April trading range will be a final flag, and the market will test the midpoint of this range soon.

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

Al created the SP500 Emini charts.

End of day summary

• Today was a bear trend from the open that went sideways for most of the day and followed a late bear trend resumption into the close.
• The bears prevented yesterday’s bull bar from triggering on the daily chart and closing below the bull bar.
• The bears managed to get down to the March 14 low. Next, the bears will try to get down to the February low.
• The April 25 signal bar closing on its high was a reminder that the market is in a trading range. Tomorrow (April 27) may gap up and close on its high. This has the potential to create a micro double top on the daily chart and possibly test the April 18 breakout point.
• Tomorrow will probably have a bull close disappointing bears on the daily chart.

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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