Emini outside up day and break above bull channel top

Trading Update: Tuesday August 17, 2021

Emini pre-open market analysis

Emini daily chart

• Yesterday gapped down but reversed back up to above Friday’s high, forming an outside up day and a new all-time high. Emini broke above bull channel top.
• The day after an outside up day often has a lot of overlap with the outside up day. It is sometimes an inside day. It is usually not a 2^nd consecutive big bull day, even in a strong bull trend.
• The Emini also broke slightly above the top of the 4-month bull channel on the daily chart yesterday, and it closed above the channel.
• The bulls want consecutive closes above the top of the channel. That would increase the chance of at least several more days of higher prices.
• As strong as the bull trend is, there is a 75% chance of the start of a reversal back down to the middle of the channel by the 5^th day above the channel. Consequently, it will probably not go much higher before there is at least a 2- to 3-day pullback.
• The next magnet above is the 4500 Big Round Number. The rally might have to reach it before traders will look to take profits.
• The bears want a couple bear days closing below the top of the channel. That would increase the chance of a reversal down to at least the middle of the channel, especially if the bear days are big and close near their lows.
• The bears are hoping for a reversal down into the end of the month so that August will close below the open of the month.
• If August has a bear body on the monthly chart, traders will expect 2 to 3 months of sideways to down trading. August would be a sell signal bar for a minor reversal down from a parabolic wedge buy climax.

Emini 5-minute chart and what to expect today

• Emini is down 22 points in the overnight Globex session. It will probably open in the middle of yesterday’s range, which increases the chance that today will mostly overlap with yesterday’s range.
• It also increases the chance that today will be an inside bar. There will probably be a reversal up from around yesterday’s low or down from around yesterday’s high.
• Yesterday was a buy climax day. The day after a buy climax day has a 50% chance of follow-through buying in the 1^st hour or so, but only a 25% chance of being a 2^nd consecutive big bull day.
• Also, there is a 75% chance of at least a couple hours of sideways to down trading that starts by the end of the 2^nd hour. With today likely opening in the middle of yesterday’s range, the trading range might begin on the open.

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. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

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

• Yesterday was a Low 1 sell signal bar in a bear trend that began in May. Today triggered the sell signal by trading below yesterday’s low.
• However, Friday was a Bull Surprise Bar after a reversal up from a double bottom with the March low. That makes it more likely that there will be more buyers than sellers below yesterday’s low. The odds favor at least a small 2^nd leg sideways to up.
• The bulls hope that the EURUSD will trade up for several weeks to above the July 30 high.
• The bears hope Friday was just a Bull Trap in a bear channel. They are hoping that today’s selloff will continue tomorrow, which would make a test of the August low likely.
• At the moment, the chart has both a bear flag and a reversal up from a double bottom. Today and tomorrow will tell us which of the 2 outcomes will succeed.
• The more bearish the bars are, the more likely the bear trend is resuming. The more bullish they are, the more likely the bulls will make another attempt to break above the EMA and continue up to the July 30 high.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

End of day summary

• Big gap down, then wedge rally to higher high double top at EMA.
• Strong selloff to below low of last week so this week is now outside down. If week closes below last week’s low, probably will go lower next week.
• Midday reversal back to midpoint of day’s range.
• Open of month is just below today’s low. Remember, August or September should be bear bar on monthly chart and begin 2- to 3-month correction of 15 to 20%. But the bears need a bear bar on the monthly chart, else Emini will continue up at least a little more.
• Bulls hope today is a bear trap, but need strong bull day tomorrow. More likely will test open of month before end of month.
• Today is a High 1 buy signal bar on the daily chart. Its bear body makes it a weak buy setup. There might be more sellers than buyers above its high.
• Since today had a big reversal but closed just above the middle of the range, there is confusion. That increases the chance of a sideways day tomorrow.

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 charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.

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