Emini and Forex Trading Update:
Wednesday February 17, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up to a new all-time high on the daily and weekly charts yesterday, but then sold off. It closed the gaps and was a bear day. Bears want an Emini mid-February reversal. Although it closed near the low, the 3-week bull channel has been tight. This is therefore a relatively weak sell setup.
It is important to note that we are in the middle of February. February is a big bull bar on the monthly chart, but it might not look that way when the month closes. Traders watch for reversals in the 2nd half of all bars, on all time frames. Most bull bars do not close on their highs. Therefore, the odds favor at least a small pullback by the end of the month.
The Emini is extremely overbought, and at the top of bull channels on the daily and weekly charts. This increases the chance of a 10% correction starting soon.
However, until there are consecutive big bear bodies on the daily chart, traders will continue to buy every brief selloff. But if today is a 2nd consecutive bear day, and if it closes near its low and has a big bear body, there would then be consecutive strong bear days. That would be the 1st time since the 10% corrections in September and October, and it would increase the chance that another 10% correction is beginning.
Is that likely? As I keep saying, until there are consecutive strong bear days, traders will buy every reversal down, and bet against consecutive big bear bars forming. That means it is more likely that today will not be a big bear day closing near its low, even though a correction will probably begin soon. But if it is, the probability shifts in favor of the bears for a few weeks.
Overnight Emini Globex trading
The Emini is down 7 points on the Globex chart. Today will therefore probably open near yesterday’s low. If today gaps down, the gap will probably be small. Small gaps typically close in the 1st hour.
If today trades below yesterday’s low, it will trigger a sell signal on the daily chart. On the 60-minute Globex chart (not shown), there is a clear triangle at 3,900. That is a strong magnet because it is a good candidate for a Final Bull Flag on that chart. The Emini should get there today.
Because the daily chart is so overbought, a big bear trend day can come at any time. Strong bear trends constantly form bull trend reversal bars. Most fail and become bear flags. If today forms a Small Pullback Bear Trend, it is better to focus on selling, despite the likely repeated reversal attempts.
Can today be a bull trend day? The 3-week rally has been strong, and the 4,000 Big Round Number is a magnet above. A big bull trend day can come at any time.
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. 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 is reversing down, from a lower high double top with the January 22 lower high. There are 3 ways to draw the wedge and I chose one.
This is a lower high major trend reversal, and the sell signal triggered when today fell below yesterday’s low. The rally is a parabolic wedge, which increases the chance of at least slightly lower prices for a few days.
The bears are hoping that this is a resumption of the bear trend that began in January. I have been saying repeatedly in my weekend blogs that there is a clear wedge top on the weekly chart, and it should lead to a test of 1.16.
However, the daily chart has been in a trading range for 3 months, and trading ranges can last a very long time. Therefore picking the resumption of the bear trend is not a very high probability bet. Most attempts to break out of the range will fail, even though it is more likely that the ultimate breakout will be down. This is despite all of the TV experts saying that the dollar is going a lot lower. It might later in the year, but that is not imminent, and it is not at all clear on the weekly and monthly charts.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been trending down overnight in a bear channel, after yesterday’s strong bear breakout (spike down). The 2-day selloff is a Spike and Channel Bear Trend. Traders should expect the channel to evolve into a trading range today or tomorrow.
While the channel could last all day, the momentum down has not been strong for the past several hours. Also, the selloff is near the support of a 50% retracement of the February rally and the January 1 low. Finally, today’s range is already big, which means it probably will not get much bigger.
Because the channel down has been tight, day traders have only been selling. But if there is a 20- to 30-pip rally, that would be a sign that exhausted bears are taking some profits. That would probably be the start of a trading range. At that point, day traders will begin to look to buy reversals up for scalps. However, they will continue to sell unless there is a strong bull trend reversal today.
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. 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 gapped down, which triggered a sell signal on the open. But it then rallied from a double bottom higher low major trend reversal for the rest of the day.
Today was a bull bar on the daily chart, and it is a High 1 bull flag buy signal bar for tomorrow. The bulls are still trying to break above the 4,000 Big Round Number before there is more than a brief pullback. The bears see that the daily chart is overbought, but until there are consecutive big bear bars, traders will continue to buy every pullback, like today.
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.
Dear Al,
Selling bar 19 after failed OO, should I expect at least two legs down?
Thank you.
Whenever a market creates a low probability bear event, bulls are trapped into bad longs and bears are trapped out of good shorts. Both want a bounce to sell. There are usually at least a couple legs sideways to down.