Emini and Forex Trading Update:
Tuesday April 7, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped up and created a 3 day island bottom. I have been saying for 2 weeks that there would be a reversal up to above 2706.00. The Emini is above that level in the Globex session.
That is 20% down from the high. As long as the Emini is below it, the Emini is in a bear market. After a parabolic wedge sell climax and an extreme 34% selloff, there were going to be value bulls coming in. Also, the bears would take profits. That 20% correction level was close enough to be a logical target.
Can today be a big bear trend after yesterday’s wedge rally to last week’s high? Probably not because yesterday was a Bull Surprise Bar on the daily chart. That typically leads to at least a small 2nd leg sideways to up.
However, since the Globex session reach my minimum target of 2706.00 and the 2 day rally was extreme, today will probably have a lot of trading range price action.
Overnight Emini Globex trading
The Emini is up 83 points in the Globex session. There will therefore be a big gap up today. The Emini is now above that 2706 target that I have talked about for 2 weeks. It is also near a 50% pullback of the bear trend. Therefore, the bulls will probably begin to take some profits and the bears will begin to scale into shorts. This reduces the chance of a big bull trend day today.
Also, when there is a big gap up, the Emini is far above the 20 bar EMA on the 5 minute chart. Traders do not like to pay far above the average price unless the bars on the 5 minute chart are far above average. If the 1st few bars are not big bull bars closing near their highs, many bulls will wait for the Emini to go sideways or down until it gets near the EMA. They will then look for a possible wedge bottom or double bottom around the EMA.
If the bears see hesitation on the open, they will look for a double top or a wedge top to sell, expecting a test down to the EMA. Less likely, that selloff could grow into a bear trend day, or the day could begin with a bear trend from the open.
Since there is confusion when a buy climax reaches an important target, there is an increased chance of a lot of trading range price action today.
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. I rarely also show limit order entries and entries on the close of bars. Buyers of 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 daily chart of the EURUSD Forex market rallied strongly overnight after a 6 day selloff. The selloff was a test of the top of the March 23 buy signal bar and the February 20 low. Also, it was a pullback from the strong rally to the March 27 high. At a minimum, the rally should reach the 20 day EMA and a 50% pullback.
The bounce and the context are good enough for traders to expect at least of few days of sideways to up trading. They will then decide between a test of the March 27 high and the March 23 low.
Trading ranges resist breaking out. Furthermore, they spend a lot of time in the middle third of the range. This 7 month expanding triangle is a triangle. A triangle is a trading range. Consequently, it is more likely that the EURUSD will be sideways to up for at least a couple weeks.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied relentlessly overnight. However, it went sideways for a few hours until an hour ago. That trading range might be a magnet later today. But, the downside is probably not big since the context is good for the bulls on the daily chart.
Because the overnight pullbacks have been small, traders have mostly been buying. The body on the daily chart is now approximately the same size as the other big bodies over the past 2 weeks. There is probably not much left to the bull trend today.
The 20 day EMA is a magnet and it is just above the day’s high. If the bulls decide that the day will not become much bigger, they will switch to buying pullbacks instead of buying at the market. Also, they will take profits near the high of the day.
Once the bears see that, they will begin to sell rallies down from the high for 10 – 20 pip scalps. Day traders should expect the strong bull trend to evolve into a trading range soon. However, the reversal up is strong enough to create a bullish bias for a few days.
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. I rarely also show limit order entries and entries on the close of bars. Buyers of 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 opened above my 2706 target and immediately sold off as bulls took profits and bears shorted. There was a rally that tested the high and then a 2nd selloff from a lower high double top. The 2nd high was also a lower high major trend reversal.
The selloff closed the gap above yesterday’s high and today closed near the low. Today is a sell signal bar for tomorrow.
The top of the developing trading range is probably between 2700 and 2800. Therefore, the Emini reached the sell zone today. It will probably not get much higher near-term. But the rally is strong enough so that the bulls will likely buy the 1st 1 – 3 day pullback. The bears will probably want a micro double top before selling aggressively.
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.
Al: why B59 above is not a buy? It is a pretty strong bull bar around today’s prior low. Thanks!
Buying in a tight bear channel is a low probability bet, especially when there were 11 consecutive bear bars. I would rather wait for a 2nd buy signal, like 73. It important to look at the context (bars to the left) in addition to the bar.
Thanks AI !
I was thinking the same at the time but the prior bars looked too parabolic to me and in such cases it seems to drill down the prior low as it did. Thanks, Al, for your comment!