Emini in Breakout Mode Just Under Important Resistance

Trading Update: Thursday February 9, 2023

Emini pre-open market analysis

Emini daily chart

• Yesterday formed an inside bar after Tuesday’s outside up bar. Inside bars are triangles on smaller time frames, with Emini in breakout mode pattern.
• The bears finally created a bear close and ended the bull streak.
• Most outside bars within a trading range, similar to Tuesday, should be considered trading range bars, not strong trend bars. Outside bars often lead to profit taking and a pullback, more than trend resumption. This is because most outside bars are climactic, increasing the pullback probability.
• The bulls also had the issue of an outside bar following a three-bar bear micro channel. This increased the odds of sellers above Monday and sideways.
• The bears have the argument of a second failed breakout of the December 13^th high. They want today to lead to a strong entry bar below Wednesday’s bear close.
• The problem the bears have is that Wednesday’s bear close is the first bear bar in 7 bars, and it is in the middle of a five-day tight trading range. This will increase the odds of buying below yesterday’s bear close and more sideways.
• The bears need more selling pressure to increase the probability of a downside breakout. Without more bear bars, the odds will still slightly favor sideways to up.
• The bulls want the rally that began in 2023 to continue as a small pullback bull trend and break out above the August 2022 high. At a minimum, the bulls want to reach the August 26^th top of the bear channel.
• Although the odds favor a sideways soon, the risk is real for an upside breakout if the bulls can continue to form open gaps.
• While breakout points such as January 17^th or January 27^th are getting tested, the bears have been unable to get a close below the breakout points. This creates negative gaps and increases the odds of one leading to a measuring gap.
• With yesterday forming an inside bar, it is a triangle on a smaller time frame chart. This will increase the odds of more sideways trading today. Triangles are trading ranges, which are magnets. This increases the probability of any breakout up or down, testing back to the midpoint of Wednesday’s bar over the next few days.
• Most traders should wait for more information. Wait for information or a strong breakout with follow-through before deciding what to do.

Emini 5-minute chart and what to expect today

• Emini is up 35 points in the overnight Globex session.
• The Globex market has been in a bull channel on the 15-minute chart since yesterday’s close.
• The bulls got a successful upside breakout of the bull channel around 12:00 AM PT, leading to a couple of legs up.  
• The bulls have completely reversed yesterdays inside bar.
• Traders should be prepared for a trading range open at the start of the U.S. Session and expect the market to go sideways for the first 6-12 bars and have a lot of limit order trading.
• Traders who struggle to trade the open should consider not trading for the first 6-12 bars until there is more clarity on the day. The open of the day has the most profit potential; however, it also has the least amount of information and certainty.
• A trader who waits until bar 6 to place a trade generally has a 50% chance of the low or high of the day being in for the rest of the day.
• There is at least an 80% chance of a swing trade beginning before the end of the second hour. The swing often begins after a double top/bottom, or a wedge top/bottom, which means a trader can wait for one of these patterns to form and enter on a stop entry, betting on at least two legs up, lasting one to two hours.
• Traders can also wait for a strong breakout with a follow-through breakout above/below support/resistance.
• Traders need to pay close attention to the first 6 bars of the day, as it will give traders much information about the type of day that is most likely.
• If the first 6 bars have a lot of overlap, it will increase the odds of a trading range lasting all day.
• If the open forms a tight channel, traders should be prepared for a possible small pullback trend.
• Also, if there is a strong breakout, and strong reversal down on the open, the odds will favor a trading range and not a trend day.  

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 bears have been able to get three bars completely below the moving average (blue line), which is a sign of strength.
• While the recent selloff is strong enough to increase the odds of a second leg down, the pullback may be more profound than what the bears want.
• Most traders will want to see a credible lower high major trend reversal before being too eager to sell.
• While the selling pressure over the past week has been strong, it is now below the moving average, which is likely support.
• The past three days are the first time the market has been completely below the moving average since October 2022. This is a sign of strong buying pressure. This means that the bulls have been so eager to buy that they have been willing to continuously pay above the average price (moving average) for several months.
• The bulls will likely be happy to buy at this price level, especially if they can form a micro double bottom.
• Overall, traders should expect a bounce and sideways up over the next few days.

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

Al created the SP500 Emini charts.

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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Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com 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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