Emini and Forex Trading Update:
Tuesday June 23, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini reversed up from above yesterday’s low but could not reach yesterday’s high. It was therefore an inside day after an outside day.
This is an ioi Breakout Mode pattern. Yesterday is now both a sell and buy signal bar for today. The Emini is in a 5 day tight trading range in the middle of a 4 week trading range. Traders see it a neutral. A neutral market always has both a bull and sell setup.
The bulls want a test into the weekly gap above the February 24 high. The bears, however, are hoping that last week’s lower high major trend reversal on the daily chart is the start of a 15% correction.
Strong bull trend favors higher prices
Because the daily chart is in a bull trend and yesterday closed near its high, the odds favor a rally up to the gap at 3238.25. Also, last week was a buy signal bar in the weekly chart. The weekly chart is still in a Small Pullback Bull Trend. Furthermore, the Emini enters a seasonally bullish window on June 26 through July 5. This is because there is often end of the quarter window dressing and pre-holiday euphoria.
What is most likely today? Traders expect the Emini to go above yesterday’s high and trigger the buy signal. It might also go above last week’s high and trigger the weekly buy signal. The bulls want a strong bull trend day and a breakout far above that high.
However, the Emini has not yet broken above its 5 day tight trading range. The bears will try to get a strong reversal down now that the Emini is at the top. They still have a lower high major trend reversal on the daily chart. But if they are unable to prevent a strong bull day today, traders will expect a test above the February 24 high within a week.
Overnight Emini Globex trading
The Emini is up 32 points in the Globex session. It will therefore probably gap far above yesterday’s high. That would trigger the ioi buy signal.
Last week is a High 1 bull flag buy signal bar on the weekly chart. If today goes above its high of 3144.00, the Emini would trigger the weekly buy signal. The bulls want this rally to enter the gap down on the weekly chart above the February 24 high.
However, it would still be at the top of the 5 day tight trading range. The bears will try for a reversal down. The top of the trading range is also last week’s high. But the bull trend on the daily and weekly charts make the bull breakout more likely.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 (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 reversing up from a double bottom with the June 3 buy climax low. I have been saying that it would pull back there for the past 2 weeks.
The bulls hope the 2 day rally will lead to a breakout above the 3 week trading range. A measured move up would create a breakout above the March high.
If the bulls get a couple closes above that high, traders will conclude that the 2 year bear trend is over. They would see the weekly and monthly charts as then being in a trading range and possibly an early bull trend.
Trading range so Breakout Mode
It is important to note that the EURUSD daily chart is still in a 3 week trading range. The June 16 lower high is a magnet above.
The bears will try to get a reversal down from there. That would be a double top bear flag in what they hope is the start of a bear trend. At a minimum, they want a break below the June 3/June 19 double bottom and then a measured move down to the May 1 high.
The 3 week late May rally was exceptionally strong, as was the March rally. Even though the EURUSD is still in a 3 week trading range, the probability still favors a bull breakout.
Traders will find out this week if the breakout is beginning this week or if there will be a test of the May 1 high first. If today and tomorrow are bull days closing on their highs and if tomorrow closes above the June 16 high, the bulls will probably get their break above the June high within a week or so.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been rallying overnight is a Small Pullback Bull Trend. Day traders have only been buying. Because the pullbacks have been small, the bears have been unable to make money. That is a sign of a strong bull trend.
The day’s range is almost as big as that of most recent days. Therefore, there might not be much left to today’s rally.
The bulls want it to continue up to above the June 16 lower high. That is about 20 pips above the overnight high.
But this rally has had 3 legs up, which is a wedge rally. That is a type of buy climax and it typically attracts profit taking.
If the bulls begin to take profits, the pullbacks will no longer be small. The bull trend will evolve into a trading range.
The bears will start to sell rallies after they see a 30 pip pullback. However, unless there is a 40 – 50 pip selloff, many day traders will continue to only look to buy.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 (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 triggered an ioi buy signal on the daily chart by going above yesterday’s high. It then poked above last week’s high and triggered a weekly High 1 buy signal.
However, it reversed down and closed near the low of the day. It is therefore a sell signal bar on the daily chart for a lower high major trend reversal.
The bears are hoping that this is the start of a 50% retracement of the 3 month rally. However, the bulls hope that today’s selloff is just a pullback from the break above last week’s high.
The gap on the weekly chart above the February 24 high is still an important magnet above. Also, the Emini has been stuck in a tight trading range for 6 days. Traders believe a test of the February 24 high is as likely as a reversal down. They are waiting for a strong breakout above or below the 6 day range.
This is the end of the quarter. June 26 to July 5 is typically a bullish window. But many institutions have huge profits this quarter. We don’t yet know how many will take profits before the end of the quarter. That could totally erase the bullish seasonal tendency.
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.
From a Trader psychology perspective, it would make sense to hold back until either the retracement occurs or the Feb 24 high is reached. From a Trader risk perspective, are Traders more likely to go long or short in this situation and are there any indicators to watch?
If you are talking about holding a position for days to weeks, I would would wait for the breakout. The Emini is in a tight trading range and traders see that as neutral. The math is better for traders to look for reversals and get out after hours to a day or so, or to wait for the breakout.
If you are talking about trading strong stocks late in a bull trend like AAPL where the stop is far below, I would only trade them by buying calls or call spreads.