Emini bounce after 3 day collapse

Emini and Forex Trading Update:
Friday May 14, 2021

Pre-Open market analysis of daily chart

• Wednesday was big bear day that closed far below bottom of 4-week trading range. A 3-day collapse.
• Weekly chart has big bear bar, and Globex weekly chart has OO pattern (consecutive outside bars, so Breakout Mode).
• Yesterday’s low was above Wednesday’s low, and its high was below Wednesday high. It was therefore an inside day.
• The high was at the resistance of last week’s low, and the bottom of the 4-week trading range.
• Yesterday closed just above its midpoint, and it is therefore a weak buy signal bar for today, for a High 1 pullback in the yearlong bull trend.
• The 3-day selloff from above the 4-week trading range to below its low, was surprisingly strong. A Bear Surprise typically has at least a small 2^nd leg sideways to down.
• Traders therefore expect a test down within a few days.
• There is a 50% chance that a 10% correction has begun. I will write about this in my weekend blog.
• What happens over the next several days will make the probability either favor the bulls, or the bears for at least a couple weeks.
• Today is Friday, so weekly support and resistance are important.
• Bulls want week to close above last week’s low, above bottom of 4-week trading range, and above midpoint of the week. If they succeed, next week will probably be sideways to up.
• The more the week closes below that resistance, and near its low, the more traders will expect lower prices next week.

Overnight Emini Globex trading on 5-minute chart

• Up 25 points in the Globex session, so might gap above yesterday’s high.
• A gap up would create a 3-day island bottom, but island tops and bottoms are usually minor reversal patterns.
• Small gaps typically close in 1^st hour, and are then not important.
• Increased chance of big bull trend day today, because bulls want to retake control and resume the yearlong bull trend.
• If today is bull trend, bulls want close to be in or above the big gap above Tuesday’s high.
• If there is an early rally, the bears will try to get a midday reversal down. They want today to be a sell signal bar on the daily chart, which they hope is beginning a Small Pullback Bear Trend.
• Most days have a lot of trading range price action, but if there is a series of strong trend bars in the 1^st hour in either direction, there would be an increased chance of a strong trend day.
• Since today is Friday, there is an increased chance of a strong move in the final hour.

Yesterday’s Emini 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. Buyers of both 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

EURUSD Forex daily chart

• 3-day pullback from double bottom bull flag (April 22 and May 5)
• Double bottom pullback buy signal triggered today when today went above yesterday’s high
• Yesterday was a bull doji day, which is a weak buy signal bar
• But it is also bad follow-through for the bears after Wednesday’s big bear bar.
• Bears are hoping that Wednesday’s selloff is the start of a 2-week leg down, and not just a pullback in the 6-week bull trend.
• Bears need reversal down today, or Monday, for lower high major trend reversal.
• Because yesterday was a bad follow-through day for the bears, and last week’s 2-day rally was strong, the odds slightly favor slightly higher prices, and possibly a test of May 11 high next week.
• Bad follow-through for the bears and a weak buy signal bar means confusion, which is a hallmark of a trading range. Traders expect every strong leg up or down to reverse.
• The EURUSD has been sideways for 4 weeks, and it is back in the January/February range. There is now a 5-month trading range, and it is within a 10 month trading range.
• Since the April rally was strong, the EURUSD might have to go sideways to up for another couple weeks, before the bears might be able to get a leg down to the bottom of the 10-month range.
• Today is the last trading day of the week. This week so far is a bear bar on the weekly chart. The more this week closes near the low of the week, the more likely next week will trade down.
• The more this week closes toward the middle or high of the week, the more likely next week will trade sideways to up.

Overnight EURUSD Forex trading on 5-minute chart

• Early strong rally for 1^st half of overnight session. It triggered a buy signal on the daily chart when it went above yesterday’s high.
• Since there was a 30-pip selloff a few hours ago, there is an increased chance of a trading range.
• The overnight bull trend makes it is better to look to buy pullbacks.
• That 30-pip selloff will make day traders willing to sell reversals down from the high, if there are strong sell setups.
• The bulls want today to close above yesterday’s high. They would like today to close near the high of the day, which would increase the chance of higher prices on Monday.
• Bulls would like today to close above the open of the week, but that is probably too far above, given that there was a 30-pip selloff a few hours ago.
• The bears want a reversal down, and for today to close on its low. Today would then be a sell signal bar on the daily chart. They currently have only a 20% chance of success.
• At a minimum, the bears want today to close below yesterday’s high. That would make Monday more likely to be sideways than up.

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. Buyers of both 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

• Gap up and Bull Trend From The Open. After Tuesday’s gap down, now 3-day island bottom.
• Rallied back into gap above Tuesday’s high and almost closed the gap.
• Extremely strong tight bull channel after 9 am PT until the test of Monday’s low, so better to only buy. Most pullbacks were only 1 bar and all were small.
• Late pullback to EMA, which happens 99.9% of all days.
• Consecutive big bull bars on daily chart so probably at least slightly higher early next week.
• Now, slightly more likely will get new high before 10% correction.
• Odds will be greater if Monday is a strong bull day.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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.

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Charts use Pacific Time

When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.

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