Emini and Forex Trading Update:
Friday December 13, 2019
I will update again at the end of the day.
Pre-Open market analysis
Last week formed a pullback on the weekly chart. It was the 1st pullback in a 9 week bull micro channel. A pullback in a bull trend is a High 1 bull flag buy signal bar. The bulls triggered the weekly buy signal yesterday by going above last week’s high.
After a huge rally to just above the top of the 13 week bull channel, the Emini reversed relentlessly down. The selloff fell back below last week’s high. When there is a buy signal on a higher time frame chart, there is usually a pullback to below the entry price.
Yesterday’s Big Up, Big Down created Big Confusion. That is a hallmark of a trading range. It increases the chance of trading range price action today.
The bulls want the week to close above the top of the 13 year bull channel. More likely, today will be a trading range day and oscillate around last week’s high. In the final hour, either last week’s high or yesterday’s high (the top of the 13 year bull channel) will probably be a magnet.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex session. Yesterday was a strong bull trend for the 1st half of the day. There was profit taking for the rest of the day. That created a trading range. There is no sign that the trading range price action is changing in the Globex session. Day traders will expect it to continue today.
Since today is Friday, weekly support and resistance are important. The 2 most important prices are the high of the week and the high of last week. The bears have only a small chance of the week closing on its low.
The bulls want today to trend up and have the week close on its high. However, the Emini is more likely to continue yesterday’s trading range and close well below the high and possibly back near the open of the week.
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.
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.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market finally reached the targets I have been discussing since the October 1 nested wedge bottom. The bulls got their 2nd leg up. There was a break above the bear trend line and the October high. Finally, today reached the 1.12 Big Round Number.
What happens next? At 3 months, this rally is the longest rally in 2 year bear trend. That bear trend is probably a bull flag on the monthly chart. The bulls are hoping that the 2017 bull trend is resuming.
But the bear trend that began in February 2018 was a Bear Spike and Channel. That usually evolves into a trading range. Traders expect a rally up to the start of the bear channel. That was the September 2018 high just above 1.18. They then should expect a trading range for many months after that.
Will the rally get there, or is this just a bigger bull leg in the bear channel? It does not matter because traders will trade them the same. Both will continue to have reversals every few weeks. Traders will therefore look to take 100 – 200 pip profits on legs up and down.
The monthly chart is probably in a trading range from just below 1.09 to 1.18. Traders expect that to continue for many months and possibly more than a year.
Overnight EURUSD Forex trading
The EURUSD gapped up overnight gapped above the 14 month bear trend line. On the 5 minute chart, it rallied and sold off. It is now around the open of the day.
Traders are deciding if the breakout above the targets will succeed or fail. The overnight reversal tells us that many bulls took profits. This profit taking increases the chance of sideways to down trading for a few days.
The selling over the past 3 hours has been minor. So far, today is a trading range day and it is back to the open. That increases the chance that it will remain a trading range day. Furthermore, the chart is telling us that traders are focusing on the open. They might look for scalps above and below it all day.
The bears want the breakout to fail and for the EURUSD to accelerate down. They would like the gap up to close and for the day to become a big bear reversal day. There is a better chance of that than of a big bull day because the EURUSD is at resistance and in a trading range on the daily chart. However, the overnight bars and legs have been small. A trading range day is more likely.
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.
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.
End of day summary
After a climactic rally on the open, the Emini entered a trading range. The Emini has been sideways since yesterday morning’s dramatic rally on the China tariff news. Today is a weak sell signal bar for Monday.
The Emini will probably continue sideways to up for the remainder of the year. The odds are against a strong reversal down when the bull trend is this strong.
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.
And also, Why I would not put my directly hard stop above H of 2. Check the close range of Thursday and the first 2 bars of Friday, it was an ET and both sides will try their best to create HH and LL and wipe out tight stops. wait one more bar until 4 is closed, stop above 4, or above 5 – a reversal attempt but eventually failed. It’s a trade-off, if you get chance to see one more bar – like you get chance to see one more card played by your competitor, you take more risk, but you get more info from them that you can use to adjust your strategy. I am practicing this mind-set too, it’s really up to your personality and trading style to find the best suitable way.
Hi Al,
could you pls comment why bear bar 4 was not sell?
thx
I would think 3 and 4 are not good enough to reverse 2. bears PRB need one more good bear bar to force the bulls re-evaluate their longs. Also, it was an opening range. if selling below 3, PRB need wide stop and scale in positions.
yep I know, but I was not looking for high prob trade with AI.
Swing set up is always unclear and low prob. if you look at low of bar 7 it tried to pb to low of bar 4.
The question was more directed to context than just bar appearence
so maybe opening range, LOM, hard to make money with stop orders before BO either way? Another way to manage this trade could be using really wide stop like a MM TGA above. There is 11.75 points between the L of 1 – 3163.25 and H of 5 -3175, and you add this 11.75 points to 3175, you get H of 8 -3186.75, a very accurate MM. and if your wide stop is one tick above H of 8, it was never triggered. Actually, I understand how stressful it will be watching the market going against you in this way. But just like playing chess, I would think ahead a couple more steps to consider the strategy of my competitor. For example, if you short below L of 3, and you see 4 closed around it’s H, you know this short PRB is screwed. and you want to put your stop above H of 4, then think one more step, if the bull scalpers BO buy the H of 4, and put their stop below L of 1, where are they going to take their profit – the MM TGA. then you will have some confidence to check the PA around MM TGA. I know this is easier said than done, I am using SPY now to practice all kinds of my thoughts and limit my actually risk within affordable range.
4 was a reasonable short for a double top bear flag with 81. I talked about that in the chat room at the time.
However, I also said that 2 was a big enough reversal up from a double bottom with yesterday’s 65 (good context, strong buy signal bar) to make at least 2 legs up likely. Therefore, there would more likely be more buyers than sellers below 3.
The buy triggered above 2. When the bar is big like that, many bulls instead buy a 50% pullback or a reversal up from a 50% pullback. Also, if the market just did something good enough to have a 2nd leg up, it is usually better not to take an opposite trade until after there is a 2nd leg up or a strong break below the bull leg (bar 1).
I should also mention bar 11. It was a Low 2 top and therefore a credible sell. My general rule is to sell below a bear bar closing near its low. At a minimum, I like the sell signal bar to close below its midpoint. However, I sometimes take trades like that, especially during the opening range when the market is much more likely to do things to trap traders out of good trades, like that one, or into bad trades, like buying the close of bar 5. If a trader only looked at a bar chart instead of a candle stick chart, he would sell without hesitation, and that is okay.
That entire selloff lacked strong sell signal bars for stop entry bears. That is why I said several times in the chat room that it would end up as a bear leg in a trading range. It was simply looking for a bottom.