Emini and Forex Trading Update:
Thursday February 5, 2021
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was the 3rd consecutive bull day on the daily chart, but it had a small bull body. The bulls want a breakout above the month-long trading range, which means testing all-time high from last month.
Three consecutive bull days is getting extreme when a market is in a trading range. That increases the chance that the Emini will pull back for a day or so. Therefore, if there is an early rally today, traders will watch for a possible reversal down to below the open and the formation of a bear body on the daily chart.
The bears want a reversal down from around last week’s all-time high for a double top. However, after 3 bull days, most traders will want at least a micro double top before shorting.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex session. Today will therefore open within the 2-day trading range. This increases the chance of more trading range trading today.
Because the 3-day rally has been strong, the odds favor at least slightly higher prices soon. However, the Emini could pull back for a day or two first.
The all-time high is only about 30 points above the current Globex price. That is less than an average daily range, and it is therefore within reach today.
However, with the Emini at the top of a 5-week trading range, there is an increased chance of a reversal down at any time. But the bears will probably need at least another sideways day to create a reliable top on the 60-minute chart. Therefore, the odds favor sideways for at least one more sideways day. If today sells off, the selloff will probably last only one day.
Yesterday’s 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.
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
The EURUSD Forex market on the daily chart has 3 consecutive days with lows below the bottom of the 2-month trading range. Today’s low also broke below the 1.20 Big Round Number.
Traders see the trading range as both a head and shoulders top, and a lower high major trend reversal. The January 1 low is the neckline. If today and tomorrow both close below the neckline, this would be a confirmed breakout. Traders would then conclude that a measured move down will be likely.
The next objective for the bears is to get a couple consecutive closes below the neckline. Then, traders will look for a test of the bottom of the most recent buy climax. That is the December 1 low. Next is the November 11 higher low and start of a 3-week bull channel. Most important is the November 4 low at the bottom of the most recent leg up on the monthly chart. That is the bottom of a 4-month trading range.
There is always a bull case. If the bulls can create a micro double bottom, or one or more surprisingly big bull bars, traders will wonder if the breakout will fail. However, if the bears get a couple closes below the neckline, traders will expect lower prices, even if there is a 2-week rally back up to around the January 22 lower high.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off to below yesterday’s low, and the 1.20 Big Round Number overnight, but then entered a trading range 5 hours ago. The key price today is the January 1 low of 1.2025. The bears need closes below that low, and it will therefore be important at the end of the day today.
With the EURUSD being sideways for several hours, day traders are selling rallies and buying reversals up from the bottom. They also have been scalping.
The fight today will be over the 1.2025 January 1 low. If the bears can get today to close below it, that will be a sign of strength. It would be much better for them if today closes far below.
The 5-hour trading range is a sign of hesitation and balance. It increases the chance that today will stay around that low all day, and then either close a little below or above it. However, because it is such an important price, there is a slightly increased chance today of either a strong breakout below the trading range, or a strong reversal up. However, stalling at a key price makes a continuation of the trading range with either a small breakout up or down most likely.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. 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.
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.
End of day summary
The Emini rallied in a Bull Trend From The Open today. The lack of strong breakouts in the 1st hour reduced the chance of the rally being very big. The Emini spent a lot of time going sideways, but it kept working higher in a Small Pullback Bull Trend. Since today closed at a new all-time high, there is an increased chance that tomorrow will gap up to a another new all-time high.
Because today was a buy climax, there is a 75% chance of at least a couple hours of sideways to down trading tomorrow that begins by the end of the 2nd hour. This is especially true after 4 consecutive days up in a tight bull channel on the 60-minute chart. However, because the Emini is testing the all-time high, there is an increased chance of either a strong trend up or down.
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. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Market Update page.
Dear Al,
Emini, since bar 4, all of bars with their lows higher than the low of prior bar, could I use this reason to consider it quite a strong bull trend so that the first bear reversal should be minor and expecting successful H1 and failed L2 bar 11?
And could I consider bar 74-75-76 ioi and BO PB H1 buy above bar 76 or more beware of TTR? (I don’t see your recommendation here).
Thank you.
Hi Vorakan,
Yes, Al’s chart does show the tight bull channel and minor reversal in Wedge text.
And yes, a buy above 76 is fine. Al called a buy on bar 73 on the more detailed Daily Setups analysis (Encyclopedia members edition). The chart above includes main analysis points only. There was a 20 Gap Bar buy at start of Tight Trading Range before getting to your ioi.
You have access to the updated Daily Setups so you can review that each day. Chart issued before midnight EST, same day.
Thank you, Richard. I’ve already subscribed to Encyclopedia and can access to his daily setups. And, yes, I saw bar 72 a green box with blue border, 20GB as you said, but I wonder why there is no green box above bar 76. So I would like to check if Al might have a reason to avoid this ioi setup.