Emini and Forex Trading Update:
Monday April 13, 2020
I will update again at the end of the day.
Pre-Open market analysis
A few weeks ago, I said that the parabolic wedge sell climax on the daily chart would lead to a strong reversal. I said the rally should reach 2706, which is 20% down from the high, or possibly 2781, which is a 50% pullback.
It reach both last week. Many bulls will begin to take profits. In addition, the bears will begin to sell. There is now a wedge rally, which is good for the bears.
Thursday is a sell signal bar in the wedge at resistance. But it is only a doji and therefore a weak sell signal bar. Furthermore, the bull channel is tight. Traders expect at least slightly higher prices. Many bears will want a micro double top before selling.
Probable bull leg in trading range and not bull trend
The important point is that the 3 week rally is more likely a leg in what will be a trading range and not a resumption of the bull trend. Consequently, traders expect a lower high and a test down.
The Emini is now high enough for bulls to begin to sell out of their longs and for bears to begin to scale into shorts. Will a 2 week pullback begin this week? Maybe. If not, then soon.
Even though the Emini is entering the sell zone, there is no top yet. Therefore, traders expect at least slightly higher prices. The March 10 lower high is 2873.50. That is the next target for the bulls.
Overnight Emini Globex trading
The Emini is down 9 points in the Globex session. Last week was a big bull bar on the weekly chart. The Emini has reversed up strongly for 3 weeks. This week will probably trade above last week’s high.
However, as I discussed over the weekend, this 3 week rally will probably fail within a couple of weeks and then begin a 2 week reversal down. But because the daily chart is in a tight bull channel, traders expect at least slightly higher prices. Therefore, bull trend days are more likely than bear trend days.
Traders know that the Emini is at a level where selling will increase. That will increase the amount of sideways trading. For example, Friday was a trading range day. Traders will be wary. They will look for reversals unless there is a strong, persistent breakout up or down.
Thursday’s setups
Here are several reasonable stop entry setups from last Thursday. 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 is at the apex of a diamond pattern. That is a triangle following an expanding triangle. It broke above the bear trend line overnight. But so far, today is a bear bar. If it closes near its low, it will be a sell signal bar for tomorrow.
A breakout from a Breakout Mode pattern has a 50% chance of failing. The bears want a reversal down to below the March low. But if today is only a minor pullbackk and the rally continues, they will try for a double top with the March 27 high.
If the bears are successful at turning the EURUSD down today, the bulls will try to form a double bottom with the April 6 low.
Trading ranges resist breaking into trends
A Breakout Mode pattern is a trading range. A trading range resists breaking out. Consequently, reversals are more likely than a breakout into a trend. Traders will sell reversals down and buy reversals up.
If today closes near its low, it would be a minor sell setup. If it closes near its high, it will be a continuation of the minor rally that began last week.
Last week was a buy signal bar on the weekly chart. Today triggered the buy by going above last week’s high. It is currently more likely that the EURUSD will continue up to the March 27 high than reverse down to the April 6 low.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market broke above last week’s high overnight. That triggered a weekly buy signal.
It quickly reversed down to below Friday’s low. Today is now an outside down bar on the daily chart. If it closes near its low, it will be a sell signal bar for tomorrow. But, it reversed up over the past 2 hours.
Even though the EURUSD sold off for the past 6 hours, the bars were small. Most had prominent tails and most overlapped prior bars. The bear trend has been week.
Also, it reversed down from above last week’s high and up from below Friday’s low. These reversals and the weak bars on the 5 minute chart make a strong trend day unlikely. Traders have been scalping, looking for reversals.
Since the past 6 hours have been down, it has been easier to make money selling. But most of the bars have been sideways. Today will probably remain a small, scalping day.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
I will post chart after the close.
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 early and the day was a triangle. There was a small bull breakout at the end of the day. However, it failed to make a new high.
By going below Thursday’s low, the Emini triggered a minor sell signal today. There is a wedge top, but the shape is not good. Also, Thursday was a doji, which is a weak sell signal bar. Finally, the bull channel has been tight. Consequently, this selloff will probably only last 1 – 3 days. It might have ended today. Today is now a High 1 bull flag buy signal bar for tomorrow.
It is important to remember that the Emini has retraced 50% of the bear trend. The bear trend is strong enough to make this rally minor. The Emini is now in the sell zone. Traders should expect a test of the April 1 higher low before the end of May.
The Emini will probably remain in a trading range for the rest of the year. That means that tops and bottoms are usually not clear. Also, follow-through after strong legs up and down is typically disappointing. That is the nature of trading ranges.
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.
Hi Al, Now that the bulls have a high 1 buy, are you looking for a double top in the sell zone before selling on certain time frames? You mentioned in a past analysis that bears would need at least a micro double top before selling because the move up has been so strong. Just curious if you are watching a particular time frame for that double top. thank you for your insights!
A reversal down from above Thursday’s high would be a wedge top. That would be good enough. But with the bull channel being tight, the bears might also need a micro double top.