Emini and Forex Trading Update:
Thursday May 23, 2019
I will update again at the end of the day.
Pre-Open market analysis
The daily chart is at the apex of a 2 week triangle. That is a neutral pattern. Yet, there have been 7 consecutive bull bars on the daily chart. This is unusual when a chart is neutral. Consequently, today will probably close below its open.
On the 60 minute chart, the triangle is a head and shoulders bottom. Every head and shoulders bottom is a higher low major trend reversal buy signal. It is also a trading range and there is always also a double top. Even with a big gap down today, the pattern will still be intact unless today has a big bear trend after the gap down.
These charts are in Breakout Mode. There is a 50% chance that a successful breakout will be up and a 50% chance it will be down. Furthermore, there is a 50% chance that the 1st breakout will fail. Traders know that the tight trading range could continue for several more days before there is a breakout
Overnight Emini Globex trading
The Emini is down 26 points in the Globex session. It will therefore probably have a big gap down today.
When there is a big gap, there is a slightly increased chance of a trend day. If there is a trend, there is a slightly greater chance of it being down.
However, a big gap leads to trading range price action for the first hour or two 80% of the time. The bears want to sell closer to the average price. They look for a wedge bear flag or a double top bear flag near the EMA for a swing down. The bulls want either a wedge bottom or a double bottom and then they buy for a swing up.
If today does not sell off strongly after the gap down, there will still be a triangle on the daily and 60 minute charts. This is especially true if it trends up from the gap down. The head and shoulders bottom would then have a double bottom higher low for its right shoulder.
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 broke below that May 3 low overnight. That is the neck line of the May 1/May 13 double top bear flag. The bears hope for a 100 pip measured move down. They hope for a huge breakout and an acceleration down, but that is unlikely.
There have been many new lows in the yearlong bear channel. Each was brief and led to a 2 – 3 week bear rally.
The bulls will again likely get a 2 – 3 rally from around the April 26 52 week low. They need a strong bull trend reversal bar or a strong reversal up for traders to conclude that the reversal has begun.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 20 pip tight trading range over the past 5 hours. This is not how a successful and strong breakout typically looks. Consequently, this breakout will probably not fall far nor last long before a 2 – 3 week bear rally begins.
Since the overnight range is tight, day traders have been scalping for 10 pips. Because the chart is testing a prior low, there is an increased chance of a big bear breakout or a big reversal up.
However, another small trading range day is more likely. Markets tend to continue to do what they have been doing until they clearly are doing something else. The overnight 5 minute chart is similar to that of most days over the past month. Day traders will assume that today will be similar as well unless there is a surprisingly big breakout up or down.
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 sold off in a bear channel for most of the day. Traders know that 75% of bear channels have bull breakouts. The bulls got their breakout at the end of the day when there was a strong short covering rally (bears taking profits). The reversal up was from just above last week’s low. This week therefore is still an inside bar on the weekly chart.
Today broke below the 2 week triangle. A triangle breakout has a 50% chance of failing. However, if the bulls get a big bull day tomorrow, the bear breakout will likely fail. They would have a double bottom with last week’s low and would then expect the 2 week trading range to continue.
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.
Hi Al,
the Long above bar 65 seemed like a good entry for a swing up, with a Stop Loss just below the bar.
When bar 67 tested below 65 before rebounding, do you think this was a case of “Stop Hunting ” ?
Would you have had your S/L 1t below 65, or lower, or even added on there expecting the test to fail ?
Thank you.