Emini and Forex Trading Update:
Tuesday April 21, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini reversed up yesterday from below Friday’s low. It then reversed back down from the 50 day moving average to close near the low. That increases the chance of lower prices today.
The bulls would like the rally to reach the 20 week EMA and the February close. However, as strong as the Emini has been, the 4 week rally will probably be just a leg in a trading range that could last for the rest of the years. Consequently, traders should expect a 2 – 3 week pullback to begin by the end of the month.
It might have begun yesterday. If so, the bear leg will probably retrace at least half of the bull leg. For example it could get down to the gap above the 3 day island bottom or even to the April 1 higher low.
But even if it does, the daily chart will still be in a trading range. Traders will expect another bull leg after a 2 – 3 week selloff.
Most days over the past 2 weeks have had at least one reversal. Traders will expect that again today, even if today trends for several hours on the open. However, because a 2 – 3 week pullback will begin soon, there is an increased chance of one or more bear trend days this week.
Overnight Emini Globex trading
The Emini is down 50 points in the Globex session. There will be a big gap down on the daily chart. When there is a big gap, the Emini is far below the EMA on the 5 minute chart. The bears do not want to sell far below the average price unless the early bars are much more bearish than average.
Big breakouts often reverse. The bulls want a series of big bull bars on the open. That would increase the chance of a big bull trend day.
However, a strong trend up or down right from the open happens only 20% of the time when there is a big gap. More often, there are one or more reversals and the Emini enters a trading range for the 1st hour or two. The bulls hope for a wedge bottom or a double bottom, and then a trend up. The bears like to sell near the average price. They want a double top or a wedge top near the EMA.
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 EURUSD Forex market on the daily chart has been sideways for 8 months. It is therefore in Breakout Mode. Last week, it broke below a triangle. However, the breakout has stalled.
The bulls are now trying to create a small double bottom. If today closes on its high, it will have a bull body. It would then be a buy signal bar for tomorrow. Traders will conclude that the bear breakout failed.
The EURUSD has been in a tight trading range for 4 days at the apex of the triangle. The bars and bodies have been small. That is a sign of complacency and not tension. This is very different from several weeks ago when the bodies were big. There was much more energy and the moves were bigger.
These small days with prominent tails do not typically instantly change into big days. Therefore, although the EURUSD is at the apex of a triangle, it does not look like there will be a big move today or tomorrow. There will probably be a transition to bigger bodies over the course of 2 to 3 days before there is a breakout.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded below yesterday’s low overnight. That triggered a Low 1 sell signal on the daily chart. But because there is no energy on the daily chart, there have not been many sellers so far below yesterday’s low. The 5 minute chart has been in a 30 pip range for the past 10 hours. Day traders have been scalping small reversals.
This overnight trading range is following a brief breakout below yesterday’s low. The bears want a resumption of that earlier overnight bear trend. They would like the range to expand and for the day to close on its low. Today would then be a relatively good day for the bears on the daily chart. It would increase the chance that the bear breakout below the triangle is succeeding.
Alternatively, if the bulls can get a 40 – 50 pip rally in the US session, today would be a reversal day. That would make traders conclude that the bear breakout has failed.
What is most likely? Markets resist change. Day traders will continue to look for reversals today unless there is a strong breakout up or down. But if there is, there would be an increased chance of follow-through tomorrow.
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 sold off to just above 2706. That is 20% down from the high. It reversed up from a lower low major trend reversal and finished the day in the middle of the range.
The Emini has probably begun a 2 – 3 week pullback. If so, it should retrace about half of the rally on the daily chart. A reasonable target zone for a higher low is between 2500 and 2600. Traders expect it to fall in 2 or more legs because of the wedge top. Therefore, it could bounce to around 2800 before continuing down. Traders will sell rallies until the Emini falls down to that buy zone.
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.
