Emini and Forex Trading Update:
Monday April 20,2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini has rallied strongly for several weeks. It is testing the March 10 lower high and the 50 day moving average. There is room to the 20 week EMA and that might be the next target. Also, the bulls would like to get back to the February close. They would then have erased the entire March collapse.
There is a wedge rally on the daily chart. That is a buy climax. The daily chart is also extremely overbought. Traders expect a 2 – 3 week pullback to begin soon.
Since the bull channel has been tight, the 1st reversal down might not fall far. However, traders should expect a pullback lasting at least a couple weeks to begin soon. Traders will buy the pullback.
Overnight Emini Globex trading
The Emini is down 54 points in the Globex session after Friday’s late, strong rally. That is disappointing for the bulls. Since disappointment is a sign of a trading range, the 4 week rally might be evolving into a trading range.
Most of the intraday trading last week was within trading ranges. Most days had at least 2 trends. Traders will therefore expect at least one reversal today.
Everyone knows that the daily chart is extremely overbought. That increases the chance of some bear trend days. But markets tend to continue to do what they have been doing. Traders expect that until the Emini is clearly doing something else.
A big gap down means that the Emini will open far below the 20 bar EMA. Traders do not like to sell far below the average price. Therefore, there is an 80% chance of trading range price action for the 1st hour or two. The bulls hope for a double bottom or wedge bottom. They bears will look for the Emini to get near the EMA and reverse down from a double top or a wedge rally.
When there is a big gap, there is a 20% chance of a strong trend from the open that lasts all day. When the big gap is down, a bear trend is slightly more likely than a bull trend.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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 in a tight trading range for a month within a bigger 8 month trading range. It is forming lower highs and higher lows. This is a triangle. It is following an expanding triangle. The pattern is now a diamond.
Any trading range is a Breakout Mode pattern. When the market is at the apex of a triangle, the odds of a breakout coming soon go up. Traders are expecting a strong breakout up or down within the next couple of weeks. It is important to note that the 1st breakout of a Breakout Mode pattern fails half of the time.
The EURUSD broke below the bull trend line last week. It therefore is breaking below the triangle.
But the breakout has been small and Friday was a bull bar. This is not how successful breakouts typically begin. Consequently, traders are still waiting for a strong breakout up or down.
At least half of the time when there is a breakout of a Breakout Mode pattern, the market continues sideways. Since it is still in a trading range, it is still in Breakout Mode.
If the EURUSD continues sideways for a couple weeks, the current triangle will evolve into either a simple trading range or a triangle with different lines. It does not matter. Traders are still waiting for a strong breakout up or down.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market broke above Friday’s high overnight. That triggered a buy signal on the daily chart for a failed breakout below a triangle.
But, just as the breakout was weak, so is the reversal up. There were more sellers than buyers above Friday’s high.
The EURUSD rallied and then sold off overnight. Neither trend was strong. It has been sideways in a 15 pip range for the past 2 hours. That makes it difficult for day traders to make even a small scalp.
They will, however, look for reversals today after 3 sideways days. But, they know that there is an increased chance of a strong breakout up or down coming soon. They will be quick to switch to swing trading if there are 2 or 3 consecutive big trend bars.
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 reversed up from below yesterday’s low on the open. After rallying for a couple hours to the 50 day moving average, it reversed down from a wedge top and exhaustive buy climax. It closed on the low of the day. That increases the chance of lower prices tomorrow.
The daily chart is still in a Small Pullback Bull Trend even though it is overbought. Traders believe that the rally still might reach the 20 week EMA and the February close before reversing.
But the rally is a wedge and a buy climax. Traders also expect a 2 – 3 week pullback to begin at any time and probably by the end of the month.
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.
