Emini and Forex Trading Update:
Tuesday April 23, 2019
I will update again at the end of the day.
Pre-Open market analysis
Tuesday gapped down on the 5 minute chart and reversed up to the 60 minute EMA. It then entered a trading range. By going above Thursday’s high, the Emini triggered a buy signal on the daily chart. The bulls still see the 2 day selloff as a pullback in a rally to a new all-time high.
However, the 60 minute chart has a nested wedge top and Wednesday was a strong bear day. There is typically a 2nd leg down from a wedge top. Traders will find out today or tomorrow if the 60 minute chart’s top or the daily chart’s bull flag will control the next week or two.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. The Emini has been sideways for 6 days. Furthermore, most days over the past month have had at least one swing up and one swing down. This trading range price action is likely to continue again today.
As always, traders will be ready for a surprisingly big move up or down. But, “surprisingly” means that trading range price action is 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. Buyers of the Brooks Trading Course 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 EURUSD daily Forex chart has pulled back from a breakout below last week’s bear flag. The 2 day rally is therefore a small bear flag.
However, there was a higher low double bottom on April 2. In addition, last week’s sell climax formed another higher low. When there are 5 legs in a trading range and higher lows and a lower high, there is a triangle. That is a Breakout Mode pattern. It is within a 5 month trading range, which is a bigger Breakout Mode pattern.
Everyone knows that there will be a breakout. But it is a mistake to assume that the odds of a bear breakout are much higher than those of a bull breakout. The chart could not be going sideways if traders felt that one side had a significant advantage. Until there is a breakout, there is no breakout. The bears and bulls have almost exactly the same odds.
When there is a Breakout Mode pattern, the 1st breakout fails and reverses 50% of the time. The successful breakout has a 50% chance of being either down or up. In the meantime, traders will continue to bet on reversals.
Bear flag on daily and weekly charts
The EURUSD Forex chart broke below yesterday’s low 15 minutes ago. This triggered a sell signal on the daily chart. But, the 2 day bear flag was made of 2 bull bars. That is a weak sell setup and so far, the breakout is small. There might be more buyers than sellers below yesterday’s low. If this is a failed breakout, the reversal back up might not come until tomorrow.
On the weekly chart, last week was a bear bar closing near its low and below the 20 week EMA. It is a sell signal bar. Today’s selloff also broke below last week’s low. This therefore triggered a weekly sell signal.
However, the weekly chart is in a tight trading range. Every breakout up and down over the past 5 months reversed within a week. Traders will expect this one to reverse as well.
But, this is the longest trading range in over 2 years. Therefore, traders know that a successful breakout is likely soon. If today’s breakout continues to grow and if there are two closes below the March low on the daily chart, traders will conclude that a bear trend has begun.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a bear breakout over the past 30 minutes. It triggered daily and weekly sell signals. So far, the bars and the breakout are not big.
However, traders know that the 5 month trading range is extreme. There is therefore an increased chance of a successful breakout. If the EURUSD 5 minute chart accelerates down or trends down relentlessly today, it will have an increased chance of being the start of a successful breakout. If so, there will be many bear trend days over the next few weeks.
It is important to remember that every breakout over the past 5 months failed. Even though a successful breakout is overdue, the odds continue to favor failed breakouts until there are 2 consecutive closes on the daily chart below the trading range.
At the moment, traders will sell rallies today. However, if the legs down are small, traders will conclude that this breakout will fail. If this breakout begins to go sideways, day traders will look to buy a reversal up.
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 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 had an early rally with 6 big bear bars. That typically results in a trading range. Instead, the bulls got a strong breakout and formed a Small Pullback Bull Trend. This ended with a buy climax and then a tight trading range.
Since the trend was a surprise, the odds favor at least a small 2nd leg up this week. Because the high was only about 16 points below the all-time high, the Emini will probably get there this week.
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 Intraday Market Update page.
