Emini and Forex Trading Update:
Wednesday April 8, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped above my target of 2706.00 and immediately sold off. It closed the gap above Monday’s high and closed near the low.
That 2706 level is 20% down from the high. As long as the market is below that number, it is still in a bear trend.
This is more symbolic than real. The Emini will be sideways to down for the next year, even if it rallies more over the next few months.
It is now near the top of the range, which will probably be around 2700 to 2800, and possibly to 3000. The bulls are now less willing to buy here.
The bears are starting to sell rallies. This rally is a wedge bear flag where the March 19 high is the 1st of the 3 legs ups. Yesterday is a sell signal bar.
But the rally has been strong enough so that the bulls will probably buy the 1st 1 – 3 day pullback. Many bears will want to see at least a micro double top before aggressively shorting. Consequently, yesterday is probably not the end of this bounce.
Overnight Emini Globex trading
The Emini is up 25 points in the Globex session. The Globex range has been small. Since yesterday was climactic, the bears are probably exhausted. That typically results in at least a couple hours of trading range price action that begins by the end of the 2nd hour.
The top of the range today will probably be at least around the top of the final sell climax. That is just below 2700. Also, that 2706 price is still important. It is therefore another magnet above.
Yesterday is a sell signal bar at resistance on the daily chart. It closed near its low. Traders today might want to see what is below yesterday’s low. The bears hope that the bulls will give up and then today will be a big bear trend day.
More likely, there will be buyers around and below yesterday’s low. The 3 week rally is strong enough so that there will probably be at least one more small leg up before there is a test of the March low.
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 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 daily chart of the EURUSD Forex market sold off strongly last week. However, most of the bars in the selloff had prominent tails below. Also, the selloff so far is still above the March 23 bottom of a strong rally. Consequently, this selloff is more likely forming a wedge bull flag than a bull trend.
Because there were 6 consecutive bear bars, there might be one more brief new breakout below this week’s low before the bulls will buy aggressively again. This is especially true since yesterday had a conspicuous tail on top and it did not close above the 20 day EMA.
Triangle after expanding triangle
With the repeated big legs up and down, there is now a triangle. This follows a 6 month expanding triangle, which means there is now a diamond pattern.
That is just another Breakout Mode pattern and adds nothing new. The daily chart has been going sideways for 8 months and it therefore has already been in Breakout Mode.
Most breakout attempts fail, like the strong rally and the strong selloff in March. But the EURUSD is closer to the bottom of the range. Also, this selloff is holding above the low of the March rally. Therefore, a breakout above the 2 week bear trend line is more likely than a test of the March 23 low.
Until there is a breakout, there is no breakout. The odds for the bulls are almost the same as for the bears. The EURUSD will probably go sideways for at least a couple more days before breaking out of the triangle.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market reversed down overnight from below yesterday’s high. It then reversed up from above yesterday’s low. Today is therefore an inside candlestick on the daily chart. That is a one day Breakout Mode pattern, and it is within a big triangle, which is a bigger Breakout Mode pattern.
Will the overnight rally continue to above yesterday’s high? It might, but the bars are small and the EURUSD has spent a lot of time going sideways during this rally. It lacks energy. That makes a strong breakout unlikely.
Because of the 6 hour bull channel, day traders have been more interested in buying pullbacks than selling rallies. However, both bull and bear day traders have been scalping for only 10 pips.
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 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
After a brief selloff on the open, the Emini rallied strongly back above 2706. It then went sideways. There was trend resumption up to above yesterday’s high. Today closed near its high.
That 2706 has been a key price. It is 20% down from the all-time high. If the bulls can hold above it, traders will conclude that the bear trend has ended.
Traders expect a test of the 50% retracement level of the 2 month bear trend. That is 2781.00. The test will probably come in the next few days.
However, if the bears could get a reversal, there would be a micro double top and a wedge rally. The 1st leg up was the March 19 high. Traders would then look for a reversal down from a wedge top. If they get it, the Emini would then likely sell off for a couple weeks.
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.
Hi Al, in the room you were initially saying that the move up was not convincing due to bear signal bar 8 and good bear bars 11 and 14 on the way up.
Where a bear scalper short above 8 and scaling in above would have exited?
Above bull bar 10 closing on its H?
Or BE on 15 if she scaled in below 14? (the small move down on 15 reached the mid point between the 2 entries).
I keep trading these set ups regularly and they rarely fail, but sometimes is difficult to recognize early if they fail and reduce as much as possible losses.
Similar to yesterday bears selling the close of 2 and seeing good bull bar 3. Holding short was the right choice there.
Many thanks for your advice!!
My general rule for exiting a trade that is now bad is to get out as soon as I think the bulls are back in control. That usually requires consecutive bull bars with one closing near its high. Sometimes it can be after a single bull bar if it is big or if it is a buy signal bar for a credible buy pattern. Therefore, getting out above 9 is okay, and getting out above 10 is necessary because at that point, there was a clear buy signal.
Another rule is “when in doubt, get out.”