Emini and Forex Trading Update:
Thursday September 5, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped up and rallied in a weak bull trend. I have mentioned the ledge top at the top of the 5 week trading range on the daily chart many times over the past week. There were 4 highs at almost the same price on the daily chart. When that happens, traders expect a breakout above the top. The breakout is typically fairly conspicuous. That means it would have to go at least 30 – 50 points above the high of the 5 week trading range.
Traders also will then expect a pullback below the top of the ledge. Consequently, both the breakout and pullback are likely over the next couple weeks.
Overnight Emini Globex trading
The Emini is up 27 points in the Globex session. It will therefore gap above yesterday’s high and probably above the top of the 5 week trading range.
It is important to note that there will probably be a pullback below the top of the ledge within a couple weeks. The bears hope that the reversal down to below the top of the ledge will begin a trend to below the 4 week trading range. They currently still have a 50% chance.
The higher the Emini goes, the more likely the rally will make a new high before falling below 2800. However, at the moment, there is still a 50% chance that this rally will form a lower high.
A big gap up has only a 20% chance of a big trend up or down from the open. Traders expect an opening 1 – 2 hour trading range. The bulls will look for a wedge bottom or double bottom to buy for a swing up. The bears want to sell a double top or wedge rally for a swing down.
Finally, if there is a trend after a trading range open, it is usually not a strong trend. Traders will expect some trading range price action later in the day.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart reversed up this week from the bottom of the 22 month bear channel. That reversal up was also from the bottom of a bear channel that began in June.
Bear channels have many reversals up and down, but continue to form lower highs and lows. There is no sign that this rally will be any different from the many other strong rallies over the past 22 months.
The bulls will take profits after 2 – 3 weeks around a lower high. The targets are the August 6 and 26 lower highs. That is also where the bears will look to reestablish their shorts.
Until there is a breakout with follow-through above the channel and above major lower highs, like the June high, the bear trend is intact.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart continued its 3 day rally overnight. The EURUSD is now testing the EMA and the August 1 low, which is the breakout point for last week’s selloff.
Since the biggest pullback was only 15 pips, day traders have been only looking to buy. The selloff over the past 30 minutes had 4 consecutive bear bars with 3 closing on their lows.
While the drop was only 15 pips, it indicates sustained profit taking. That is the 1st step toward a more 2 sided market. Consequently, the bears will begin to sell reversals for scalps.
Furthermore, the bulls will begin to take quicker profits. Also, they will become more selective about their entries. They will tend to buy pullbacks instead of simply at the market. This change in behavior typically will convert a strong bull trend into a trading range.
If the bears can stop the rally and begin a trading range, they will have a better chance of getting a reversal down from resistance later today. However, the overnight bull channel was tight. Consequently, the best the bears probably will get today is a trading range and not a trend reversal down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped above the August ledge top. There was a bull trend from the open that broke above the July 18 neck line of the double top on the daily chart. The rally was a parabolic wedge buy climax and the day evolved into a trading range day. It closed near that neck line.
Tomorrow might also have a lot of trading range price action. Traders are deciding if the breakout will succeed or fail. That confusion often leads to more sideways trading.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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 Intraday Market Update page.
Hi Al, would you recommend any defaults when trying to swing trade, i.e. if you’re in 6 ticks profit do you move to break even or do you simply rely on your stop and get out if a blatant signal in the opposite direction. I know how the math doesn’t make sense for break even just looking to reduce my losses. I’ve have too many trades go into profit then a loss recently.
There is no mathematical basis for a breakeven stop. But there is an emotional reason to use it, and it can be okay.
If I am early in a swing trade, I tend to rely on my stop. This is because a trend often goes sideways for several bars before the weak side gives up. There is often a transition before the trend begins.
However, if there is a clear opposite signal, I will get out.