Emini doji inside day buy signal bar and seasonally bullish
Pre-Open market analysis
The Emini formed a small bull doji inside day yesterday after Monday’s bear breakout. This reduces the chance of a big selloff this week. The Emini is back in the May trading range. It therefore might go sideways here for several days.
Since yesterday was a bull inside day after a bear breakout, it is a buy signal bar and a sell signal bar. But, the 3 week bear channel is tight and yesterday did not close on its high. Therefore, sideways for a few days is more likely that an immediate reversal up or a continuation down.
I mentioned that the Emini has a seasonal tendency to rally from June 26 to July 5. This further reduces the chances of a continued selloff over the next week.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex market. In addition, it reversed up 30 points overnight after testing yesterday’s low. Also, the day session began a broad bull channel yesterday and the late selloff was not strong. Consequently, despite Monday’s strong selloff, the day is starting more bullish than bearish.
Since yesterday had a small range, today will probably trade either above yesterday’s high or below its low. Because the range was small, there is an increased chance of an outside day, which means a break above and below yesterday’s range. As a doji bar, yesterday is a weak signal bar for the bulls and the bears. This means that there will probably be sellers above its high and buyers below its low and today will probably not be a big trend day.
But, Monday was climactic. There is therefore an increased chance of another big move up or down today. While the odds favor more two-sided trading after the sell climax, day traders will swing trade if there is a strong breakout up or down.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart sold off over the past 2 days at a 50% retracement from the June 14 sell climax. However, this 2 day selloff follows 3 strong bull days and a double bottom at support. The selloff will probably be minor.
This means that there will likely be a 2nd leg up. Since the overnight low is around a 50% pullback, bulls will probably stop the selling today or tomorrow.
The bears will probably need a small double top with Monday’s high before they will be able to break below the June 21 low. Even if they get their new low, the selloff to the May 29 low was climactic and at major support. Therefore, there will likely be buyers 50 – 100 pips below the June low.
Most trading ranges after trends on the daily chart over the past 3 years lasted at least a couple months. There is no reason to believe this one will be different. The odds are that this one will last at least another month before there is a trend up or down.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 70 pips overnight, But, the selloff was in a broad bear channel. This is a weak bear trend and therefore more likely a leg in a trading range than a resumption of the bear trend on the daily chart. The odds are that the selling will stop somewhere above 1.1650 and lead to a 100 – 200 pip bounce over the next couple of weeks.
Since the selloff has been weak, day traders will buy below prior lows on the 5 minute chart. Day trading bears will prefer to sell 20 – 30 pip bounces and not at new lows. Instead, they will scalp out of their shorts below prior lows. Day traders will continue to scalp today unless there is a strong breakout up or down. But, that is unlikely in the middle of a 2 week trading range within a bigger range.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today reversed down and formed an outside down day. However, it followed a day and a half of a strong rally. Therefore, there was Big Down on Monday, Big Up on Tuesday and early today, and more Big Down today. This creates confusion and makes a trading range likely over the next few days. The bulls want a double bottom with Monday’s low.
Since today was a bear outside down day in a bear trend on the daily chart, it is a sell signal bar for tomorrow. There is therefore an increased chance of a big bear day tomorrow. But, the Emini is in May’s trading range and has had 3 sideways days. The odds therefore favor a lack of follow-through selling.
Because yesterday’s selloff was climactic, there is a 75% chance of at least a couple hours of sideways to up trading by the end of the 2nd hour.
See the weekly update for a discussion of the price action on the weekly candlestick chart and for what to expect going into next week.
sorry forget to ask you about SL placement ( above signal bar or further)?
I feel really sorry for you, when you have to deal with all this moaning:), but when exactly would you call failed BO above parabolic wedge?
Bar 15 clearly could be just PB after failed BO. Did you take the trade? What exactly gave you believe its good set up and not just PB of failed wedge? Was it climactic behavior?
I don’t know if you are in the chat room, but I talked about it there. When there is a parabolic wedge top, and then a breakout above the top, the breakout often has a big bull bar. When it does, that bar is often an exhaustive buy climax and the end of the bull trend. Traders look for the next bar to be a bear bar closing near its low. That is a good swing setup, especially in the 1st hour. I don’t remember how I sold that setup, but I typically sell with a stop 1 tick below the bear bar.