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Emini either forming lower high in bear trend or pulling back from May 13 reversal up

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Emini and Forex Trading Update:
Wednesday May 19, 2021

Pre-Open market analysis of daily chart

  • Yesterday was a bear day. It closed the gap above last Thursday’s high, eliminating last week’s 3-day island bottom.
  • Today will probably gap down. That will create a 3-day island top. Remember, last week’s gap up created a 3-day island bottom, and I always point out that island tops and bottoms are usually minor reversal patterns.
  • Traders are wondering if the 2-day rally is reversing down from a lower high in bear trend (major trend reversal), or simply having a pullback.
  • Today will give traders useful information about what to expect over the next couple weeks.
  • If it is a big bear day and it closes on its low, the odds will shift back in favor of the bears.
  • If today is a big bull day, traders will see last week’s reversal up as still intact.
  • If today is a small bull or bear bar, especially if it closes in the middle third, it would increase the chance of more sideways trading.

Breakout Mode on the daily and weekly charts

  • Last week reversed down from above a month-long trading range, and then up from below the trading range.
  • A 2nd reversal has a higher probability of success.
  • Since the Emini is still in the its 5-week trading range, the bulls have only a slightly higher probability of a break above the top of the range, before there is a break below.
  • On the weekly Globex chart, there are consecutive outside (OO) bars. That is a Breakout Mode pattern.
  • However, the trading range alone is a Breakout Mode pattern. The OO increases the chance that the breakout up or down will lead to a 200-point measured move, based on the height of the trading range.
  • Traders are deciding if the rally last week was only a pullback from the break below the range, or a reversal up from a failed breakout below.
  • Last week’s 2-day rally was strong enough to make a reversal up more likely than a bounce in a new bear trend.
  • But if the bears get a big bear bar today or tomorrow, the odds of a bear breakout of the 5-week trading range will be greater than of a bull breakout.

Overnight Emini Globex trading on 5-minute chart

  • With today’s big gap down, the selling might continue for an hour or two.
  • Since yesterday was in a sell climax for only half a day, it might sell off strongly for the 1st half of today as well.
  • But, when once a sell climax lasts 50 or 60 bars, there is a 75% chance of at least a couple hours of sideways to up trading. However, that means there is a 25% chance of a big bear trend day.
  • Therefore, if there is an early bear trend, it will probably convert to a trading range, or reverse up in the middle of the day.

Yesterday’s Emini setups

Emini trading range then bear breakout and closed the gap. Forming possible lower high in bear trend.

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.

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

  • Today broke above the February 25 high, but so far by only 3 pips.
  • If today is a bear bar closing near its low, it will be a sell signal for a double top, and a nested wedge rally.
  • The wedge is nested since the 3rd leg up is a micro wedge (blue line), which increases the probability of a reversal if today is a strong sell signal bar.
  • Bulls need consecutive closes above February high, for traders to look for a possible break above the January 6 high, which is the top of the 2-year trading range.
  • Trading ranges resist breaking out, and therefore traders will look for a reversal from here, or from around the January high.

Overnight EURUSD Forex trading on 5-minute chart

  • Rallied to 3 pips above the February 25 high, but then reversed down to below the open, creating a bear body on the daily chart.
  • If the bears are going to take control, they will make today close near its low, so that it would be a more reliable sell signal bar on the daily chart.
  • If today closes above the February 25 high, traders will expect higher prices tomorrow.
  • The selloff reversed up sharply to around the open of the day. Big Down, Big Up creates Big Confusion, which is a hallmark of a trading range.
  • This makes a trading range likely for the rest of the day, and it will probably center around the open of the day.
  • The more today closes near the low of the day, the more likely the bears are taking control. That would increase the chances of lower prices for a couple weeks.
  • The more today closes near the high, the more likely the bulls are still in control. That would increase the chance of higher prices.
  • If today finishes with a small bull or bear body, there is an increased chance of sideways trading for a few days.

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

Emini bull trending trading range day

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

  • Trading range open. Rallied from double bottom major trend reversal just above last week’s low. Also was truncated wedge bottom.
  • Reversed down from measured move up from low of day to high of open. Reversal was also at 50% pullback from yesterday’s sell climax.
  • Reversed back up to a new high from a higher low major trend reversal, which was a test of the high of the open and a 50% pullback.
  • It then reversed down again. That rally was a 2nd leg bull trap.
  • Rallied into the close and closed at the high. Bull Trending Trading Range Day.
  • The bulls hope today is a double bottom reversal with last week’s low. Buy signal bar for tomorrow, and tomorrow might gap up.
  • The bears hope it is a bounce at last week’s low and that last week’s selloff resumes down soon.
  • After many big reversals, might have to go sideways for a few days before we know if the bulls or bears will win. Might form triangle.

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 Time

When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.

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