Emini and Forex Trading Update:
Monday February 10, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini pulled back from a new high on Thursday. The rally to the new high was strong enough to make one more leg up likely.
The bulls might want a test down to the January 29 breakout point before buying again. That high is 3292.75. If there is a test there and a reversal up, the rally would be a 3rd leg up. That could lead to a wedge top and another test of the January 31 low.
The Emini has had trading range price action since late December. While it made a new high last week, the 2 week rally is probably a bull leg in what will be in hindsight a trading range. That means that traders should expect a bear leg in the trading range to begin within a couple weeks.
The daily chart is still in a bull trend. But because it is now also likely in a trading range, the odds favor a 2 – 3 week pullback to begin by the end of next week. The Emini still might get a 5 – 10% pullback before going much higher.
Overnight Emini Globex trading
The Emini is down 10 points in the Globex session. It might have to drift down to below the January 29 high of 3292.75 before there is another leg up. There can be swings up and down as the Emini works lower, but a strong move up or down is not likely today.
Friday was a small bear day. Its bear body makes Friday a weak High 1 bull flag buy signal bar for today. Consequently, there might be more sellers than buyers above its high. This reduces the chance of a rally today to above Friday’s high.
Thursday was not a strong sell signal bar. Friday was a small bear day will a prominent tail below. Traders see it as a weak entry bar for the bears.
With the past 2 days not being particularly good for the bulls or the bears, traders are expecting trading range price action today. This means that they expect that any trend lasting a few hours will evolve into a trading range or reverse into an opposite trend for a few hours. It reduces the chance of a big trend up or down 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. 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 weekly chart of the EURUSD Forex market Has been in a bear trend for 2 years. Yet, it is still above the 2017 low. Therefore, this 2 year bear channel is probably a bull flag in the bull trend that began in 2017.
The bear channel has reversed every few weeks for 20 months. Many of the rallies and selloffs have been strong, but none has ended the bear channel. This is even true of last month’s breakout above the bear trend line. All it did was make the channel a little wider. It did not end the bear trend. The weekly chart is now testing the October low.
1.08 is a magnet below
There are several magnets below the October low and around 1.08. The closer the EURUSD gets to them, the more likely it will not be able to escape the magnetic pull. Consequently, the chart might have to reach all of them before the bears will take final profits and the bulls will buy aggressively enough to begin a rally that lasts more than a couple months.
There was a gap up 2 years ago on the weekly chart, which is rare and a magnet. The bottom of the gap is the April 21, 2017 high of 1.0777. There are also 2 measured move targets from double top bear flags in the 2 year bear trend.
All 3 of these support levels are very close to the support of the 1.08 Big Round Number. That might be where the chart has to go before the bear trend finally ends.
Sell climax on the daily chart
On the daily chart (not shown), Friday was a big day and it was the 5th consecutive bear bar. That is extreme selling and it will probably attract some profit taking early this week. Consequently, day traders will begin to look to buy reversals up from prior lows on the 5 minute chart.
They will continue to sell, but will soon switch to selling 50 – 100 pip rallies. In addition, they will start taking profits around prior lows. This will probably result in a trading range for at least a couple days.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market was in a 15 pip range overnight. However, the bears started a small breakout 20 minutes ago.
The bears on the 60 minute chart are getting exhausted and are becoming resistant to selling at the low. The 60 minute chart is still in a bear trend, but it is now also in a trading range. Also, the range is late in a bear trend. It is therefore a likely Final Bear Flag. That means that traders will look to buy a reversal up from a bear breakout. They expect at least a few sideways days to begin this week.
The selloff that began a few minutes ago is strong enough to have at least a small 2nd leg down. But, day traders will not expect to make more than 30 pips on any move for at least a few days. The sell climax will probably evolve into a trading range today or tomorrow.
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
The Emini rallied from below Friday’s low to above its high. Today was therefore an outside up day. It entered a trading range for a few hours and got trend resumption up and closed on the high at a new all-time high. Traders expect at least slightly higher prices tomorrow and later in the week.
However, yesterday was a bear day and therefore a weak buy signal bar. Additionally, the Emini has probably been in a trading range since early January. It is searching for the top of the range.
Also, the January 29 high is the breakout point of last week’s rally. Consequently, it is a magnet below. The Emini might have to test it before it can go much higher.
A reversal down from a new high would create a wedge top over the past 3 weeks. That would increase the chance of a test of the January low within the next month.
Traders suspect that there will be a test of the January low within a month or so, but there is no reliable top yet. The odds favor higher prices.
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.
Al, in the chat room you mentioned B1-B3 not great trade for beginners because of the risk. But it is then marked as a good swing trade for beginners on your daily charts. Are these charts end of day only after they prove to be profitable. Or possibly someone else marking charts? Just trying to establish some guidelines studying your end of day charts for the past few months, but this was a bit confusing to me. Thanks
You are correct about charts showing actual reasonable trades for beginners. I will change the text below the chart.
I should have been clearer in the chat room. I think I said that it was not good unless a person had an account of $20k or more. I should also have said that an alternative was to trade micro Eminis.
This is always the case when there are big bars like that, but I am often rushing to trade and talk, and the result is that I don’t always say enough.