Emini and Forex Trading Update:
Friday October 23, 2020
I will update again at the end of the day.
Pre-Open market analysis
I have been saying that the Emini would probably trade below Monday’s low and reverse up. That would create a 6-day Emini micro wedge bull flag and a breakout test of the September 16 high, which was the breakout point of the rally 2 weeks ago. The bulls got their wish. Yesterday reversed up and it is now the buy signal bar for the pattern.
Traders expect today to go above yesterday’s high, which would trigger the buy signal. There is an increased chance of a rally today.
Can the Emini instead selloff? For example, can it trigger the buy signal and reverse down to below yesterday’s low forming an outside down day? Possible, but not likely. But because it has been sideways for several days, the chance of a big bull day is less than what traders might think after yesterday’s strong buy signal bar on the daily chart.
Weekly support and resistance are important on Fridays
Today is Friday and weekly support and resistance can be important, especially in the final hour. The most important weekly target has been last week’s low. The Emini has been trading around it all week. The bears want this week to close below it because last week was a sell signal bar. The chance of lower prices next week goes up if this week closes below last week’s low.
The bulls want the week to close above the open of the week. This week would then have a bull body and be a High 1 buy signal bar for next week. The open of the week is 40 points above yesterday’s close, which is far, but within reach.
Overnight Emini Globex trading
The Emini is up 12 points in the Globex session. It will therefore probably gap up today. If it does, the gap will not be big. That increases the chance that the gap will close in the first hour or so.
Because yesterday reversed up from a wedge bull flag at support on the daily chart, traders expect a rally today. But after several sideways days, the odds are somewhat less than they would normally be after a wedge bull flag.
The bulls want a strong rally from the open and the bears want the gap up to lead to an immediate selloff. If there is a series of strong trend bars up or down, then traders will expect a trend right from the open.
However, most days go sideways for the 1st hour or two. Then, the bulls look to buy a reversal up from a double bottom or wedge bottom, and the bears look to sell a rally to a double top or a wedge top.
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 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
The EURUSD Forex market on the daily chart pulled back yesterday from a test of the September 21 sell climax high. By going below yesterday’s low, the EURUSD triggered a sell signal overnight. However, it reversed up sharply.
The September 10 lower high is a magnet above. Traders expect the EURUSD to get there today or early next week. But as strong as the month-long rally has been, traders know that you have to look at all of the bars on the chart. Unless the rally breaks strongly above the September 1 high, the EURUSD is still in a 3-month trading range.
In a trading range, there are many strong legs up and down. But traders know that reversals are more likely than a successful breakout.
Consequently, next week will be important. Will the bulls be able to break above the September 1 top of the range? The odds favor a reversal down, but if the bulls get a couple closes above the September high, traders will look for the rally to continue to the February 2018 high around 1.25.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market reversed up strongly overnight from below yesterday’s low. It is now near yesterday’s high. The rally has been strong enough to continue to above yesterday’s high. Today would then be an outside up day on the daily chart. That would increase the chance of at least slightly higher prices next week.
The overnight rally has been strong. Day traders have only been buying. However, the EURUSD is now just below yesterday’s high and the September 21 high, which are resistance. Also, there have been several small pullbacks in the past few hours.
The 5-minute chart might transition into a trading range around yesterday’s high. But day traders will not buy until there is a 20 to 30-pip pullback. At that point, they will also begin to sell reversals down from the top of the developing range.
Can the EURUSD continue up much higher today? Probably not. It raced up to resistance and it has been stalling. Also, the day’s range is already about as big as most recent days. It is therefore more likely that it will be sideways to up for the remainder of the day.
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 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
The Emini sold off for 3 hours, but limit order bulls made money all of the way down. That made a swing up likely. The bulls got a reversal up from a wedge bottom at last week’s low.
Today triggered a wedge bull flag buy signal on the daily chart. But since today had a bear body, it was a weak entry bar. The bulls need bull bars early next week. If they do not get them, traders will look for a break below yesterday’s wedge bottom.
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.
