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Emini in Breakout Mode, Forming Triangle above Moving Average

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Trading Update: Thursday February 16, 2023

Emini pre-open market analysis

Emini daily chart

  • The daily chart formed a bull inside bar closing on its high yesterday.
  • The market has been forming triangle above moving average over the past ten trading days, a breakout mode pattern. The bulls keep the market above the moving average, which is a sign of strength for the bulls and increases the probability of an upside breakout.
  • The bulls want a breakout above the triangle and a test of the August 26th high, which was the start of a bear channel.
  • With the market having four consecutive bull bars, the odds slightly favor the upside breakout. However, it is important to remember that if the bulls had a high probability, the market would be racing up to resistance (August 26th high) and not stalling in a tight trading range.
  • This means that the bears must have a credible argument, or the market would not go sideways.
  • The bears want any upside breakout of the current triangle to fail and reverse down. Next, they want a selloff down to 4,000 and the January 30th low, bottom of the third leg in a wedge top.
  • Traders that want high probability should wait for a credible breakout up or down of the triangle. Until there is a clear breakout, traders should assume that the probability is close to 50% for both the bulls and the bears.
  • Overall, the market is in a triangle, which is a breakout mode pattern. Traders should assume that the probability is close to neutral.

Emini 5-minute chart and what to expect today

  • Emini is down 50 points in the overnight Globex session.
  • The Emini sold off in a tight bear channel for most of the overnight Globex session.
  • The bulls want the tight bear channel to be a bull flag and lead to an upside breakout, and the bears want to get a downside breakout of the bear flag.
  • As always, traders should assume the U.S. session will have a lot of trading range trading and go mostly sideways for the first 6-12 bars.
  • Traders should consider not trading the first 6-12 bars unless they are comfortable with limit order trading.
  • Most traders should try and catch a swing trade on the open. It is common for one to form before the end of the second hour after forming a double top/bottom or a wedge top/bottom.
  • The most crucial thing to remember on the open is patience. There is plenty of time in the day to find a few good trades, even if one does not trade the first 6 bars of the day.
  • If a trader waits for 12 bars before trading, they will have more information and therefore have a higher probability of either the high or the low being set, compared to trading the first 1-3 bars of the day.

Emini intraday market update

  • The Emini gapped down and went sideways for the first 6 bars of the day.
  • The market stalled just under yesterday’s low; however, with the first 2 bars of the day being bull bars, the odds favored a second leg and a close above yesterday’s low.
  • The bulls formed a double bottom on bar 6, and the market has been in a buy-the-close rally since Bar 12 (7:30 AM PT).
  • While the buy-the-close rally is good for the bulls, it has many overlapping bars, increasing the odds of the market going sideways at the moving average.
  • The gap down was large, and the odds favor an attempt at a second leg. This increases the odds of the market finding resistance soon. The bulls have an argument for a bull trend from the open, even though the first 6 bars went sideways.
  • It is unlikely this bull trend from bar 6 will last all day.
  • A large gap down is a sign of strength and a bear breakout. This means that it is possible the rally to bar 12 will make the market a trading range, and the bears will get a deep pullback back to the opening range of the past 6 bars.
  • The rally to bar 12 is strong enough for a second leg up, so the bulls will look to buy any pullback. Traders should expect sideways soon.

Yesterday’s Emini setups

SP500 Emini 5-minute Wedge Bottom Then Broad Bull Channel - forming triangle above moving average

Tim created the SP500 Emini chart from Al’s provided summary & setups

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

EURUSD Daily: Bears Trying to Hold below Moving Average
  • The EURUSD is beginning to hold below the moving average (blue line), a sign of strength by the bears.
  • The odds still favor a rally and the formation of a lower major high trend reversal soon.
  • Bull channels typically convert into trading ranges and not opposite trends. This means the odds favor a deeper pullback than what the bears want and the formation of a lower high major trend reversal. This means that a bear trend is unlikely with the formation of a major trend reversal.
  • It is possible that the market has to go lower first. However, the downside will likely be limited and be bought.
  • Overall, the odds favor a rally and a couple of legs up over the next 5-10 trading days.

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

SP500 Emini 5-minute Bull trend from the open then DT and reversal down

Tim created the SP500 Emini chart from Al’s provided summary & setups

End of day review

  • I will update at the end of the day.

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

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.

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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