Emini and Forex Trading Update:
Monday February 1, 2021
I will update again at the end of the day.
Pre-Open market analysis
The bulls want February to be a bull inside bar on the monthly chart. There would then be another ioi, like in October, and traders will look for another leg up in March.
The bears want February to trade below the January low. That would trigger a minor sell signal. Traders would then look for a month or two of lower prices.
Last week formed an outside down week on the weekly chart, and the week closed below the week before. Also, the Emini broke below the 3-month bull channel on the daily chart. Most importantly, January had a bear body on the monthly chart. These factors increase the chances of sideways to down trading this week. Look back at the past 2 years. There was a selloff in February. Traders are wondering if this will be 3 in a row.
If this is the start of a pullback, the 1st target is the bottom of the December trading range, just above 3600. Below that is the November 10 low at 3500, which was the start of the bull channel.
Since the daily chart is now in a trading range, the selloff will probably bounce along the way down. That means the Emini could go sideways for a week or more as it works lower.
There is a 50% chance that the selloff will end around 3600. However, the bulls need consecutive strong bull bars, to flip the probability back in favor of a continuation up to a new high without first testing support.
Overnight Emini Globex trading
The Emini sold off overnight, but it reversed up. It is now up 34 points in the Globex session. It will open relatively far above Friday’s close and in the middle of Friday’s range.
Friday had a sell climax and a reversal up. The bulls want the reversal up to continue this week and undo Friday’s damage. Because the daily, weekly, and monthly charts are in a bull trend, there is an increased chance that last week’s selloff will fail. That means there is an increased chance of a bull trend day today. Can today be another big bear day? Yes, and if it is, traders will expect a move down below 3600 this week.
What is most likely? Most days have a lot of trading range trading. That is especially true after a sell climax day, like Friday. Traders will watch the open. If most of the bars have prominent tails and lot of reversals, traders will expect a trading range open and a trading range day.
But if there is a series of strong trend bars up or down, they will look for a trend. Even if there is a strong trend, traders know that many strong trends over the past few weeks had midday reversals. If there is a trend, traders will be ready for one again today.
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. 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
The EURUSD Forex market on the daily chart is turning down from the January 22 lower high. The bears hope that the lower high will be the 1st in a series of lower highs, and the start of a bear trend. They see that lower high as the right shoulder of a head and shoulders top, and a lower high major trend reversal. If they get a couple closes below the January 1 low, which is the neckline, traders will look for a measured move down to the November 4 low of 1.6.
Most tops and bottoms are trading ranges, which mean they are Breakout Mode pattern. This is another example. Every trading range also has a credible buy pattern. Traders see the head and shoulders top as a triangle bull flag. The bulls need a strong break above the January 22 lower high and then a couple closes above the January 6 high, before traders will conclude that the bull trend is resuming.
What is most likely? Trading ranges resist change. Until there is a convincing breakout up or down, traders will continue to look for reversals. Even though at the moment the bears have slightly higher probability of a successful bear breakout, until there is a breakout, there is no breakout. The odds of a reversal are always higher than of a successful breakout.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off sharply over night, but it has been sideways in a tight range for 2 hours. Day traders have only been making money selling. However, now that the range is so tight, even scalpers are having a hard time making even 10 pips.
Because there is a trading range and the EURUSD is near the support of the bottom of its 2-month trading range, the bulls are willing to buy. But the bears will continue to sell rallies, hoping for a resumption of the bear trend.
A trading range is a Breakout Mode pattern. Many traders are trading reversals, hoping for a surprisingly strong move up or down. However, they have been scalping out when they quickly become disappointed by the lack of a strong breakout.
Can today have either a strong bear breakout below the 2-month range, or a strong reversal up? A tight trading range after a sell climax usually will lead either to at least a small resumption down, or a small reversal up. A relative small move on the 5-minute chart today is more likely than a big trend, especially since the EURUSD has been sideways for 3 weeks with mostly small days.
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
The Emini gapped up and then pulled back to the EMA. It rallied from a higher low double bottom at the EMA and formed a Spike and Channel Bull Trend. The rally continued to above yesterday’s high, where it stalled. It pulled back into the close.
Today is a buy signal bar on the daily chart for a 2-bar reversal and a High 2 bull flag. But yesterday has a big tail on top. Also, the Emini has been in a trading range since early January, and traders are taking quick profits every few days. That reduces the chance that today is a resumption of the bull trend.
Instead, the rally might stall at Thursday’s lower high. If the bulls break strongly above that high, traders will conclude that the correction is over and that the bull trend is resuming.
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.
