Emini and Forex Trading Update:
Wednesday December 18, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini made another all-time high yesterday. However, yesterday was also another small trading range day that traded around the 3200 Big Round Number.
Is the Emini stalling here because of the impeachment? Traders don’t think that way, and it is better to ignore the news. Just trade based on the price action, which is the result of the cumulative votes of anyone in the market who matters.
Because the Emini is stalling at resistance, it might pull back for a day or two. But since the bulls want the year to close on its high and the bull trend is strong, the odds still favor sideways to up through December.
If today gaps down, the bears will have a 2 day island top. An island top is a minor reversal, but traders know that it could lead to a 2 – 3 day pullback. If there is a gap down, the bulls will try to close it early today. If there is an early rally after a gap down, the bears will look for it to fail and form an early high of the day.
It is important to see that the Emini is stalling at the resistance of the 3200 Big Round Number. That slightly increases the chance of a big trend day up or down. But with the unusually tight trading ranges of the past 2 days, day traders know that the odds favor more trading range price action again today. If there is a trend, down is more likely because of the buy climax over the past 3 weeks.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex session. It will therefore probably again be around the 3200 magnet on the open. It could stay there all day, like it has done for 2 days.
The bears want either a gap down or a strong selloff below yesterday’s low. If they get either, they could get a bear trend day today.
The 2 day trading range is a bull flag. The bulls therefore want a breakout above and then a bull trend.
After 2 days of tight trading range price action, day traders know that the odds favor more sideways trading again today.
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.
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 daily chart of the EURUSD Forex market turned down overnight after yesterday’s 2nd test of the bear trend line. There is now a micro double top. Friday is also now a double top with the October high.
Since the weekly chart is still in a bear trend, the bears want a reversal down to a new 2 year low. However, there is also a 3 month trading range within a 5 month trading range.
Trading ranges resist successful breakouts. Consequently, the best the bears can probably get is a brief dip below the October low. More likely, if today is the start of a selloff, it will probably only last 2 – 3 weeks, like every other leg up and down for the past 2 years.
The bulls want today’s selloff to be brief. They would like a reversal back up this week. Then, the selloff will be just a High 2 bull flag in the 3 week rally. If the EURUSD does not reverse up this week, the bulls will try to get a reversal up from a double bottom with either the December 6 or November 29 lows.
It is important to remember that the EURUSD daily chart is in a trading range. Traders will expect reversals instead of breakouts. There will eventually be a successful breakout, but most attempts fail. As a result, traders will continue to expect reversals every few weeks.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off 45 pips overnight. However, the selloff came in 2 legs. The current second leg has a series of sell climaxes and the bars are small. While there is no bottom yet, this type of selloff typically evolves into a trading range. Although day traders have only been selling, once the selloff stalls and the chart begins to go sideways, they will also buy.
The selloff has been in a tight bear channel. Also, there is a micro double top at resistance on the daily chart. That makes a bull trend reversal unlikely. But day traders will probably soon switch from swing trading shorts to scalping longs and shorts.
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.
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
Today was the 3rd consecutive small trading range day that oscillated around the 3200 Big Round Number. Because traders clearly consider it important, the Emini is in Breakout Mode.
However, a 3 day tight trading range late in a bull trend is often a Final Bull Flag. Therefore a bull breakout probably will not go far before having at least a minor reversal down.
Also, the bull trend is strong. Consequently a break below will probably only be a 2 – 3 day pullback. There are 2 weeks left to the year and to the decade. Both opened near their lows and the bulls want both to close near their highs.
What will traders expect tomorrow? More of the same, but they are ready for a breakout up or down at any time.
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.
Are ledge tops/bottoms not applicable in tight TRs? B62-B66 had ledge top & bottom, 67 was a failed bear brkout followed by a bull bar 68. Should we not expect a breakout above 68? Not sure why this wasn’t shown as a buy signal when in a fairly tight bull channel from 38? A few of your ledge examples show buy orders above that bull bar expecting a bull breakout there…slide 111, 115, 117, 121, 124. Just trying to understand context of ledges relative to today.
Thanks
Hi Al, I am always torn as to whether or not to get out 4 ticks below a bull bar (in a up trending market) versus trailing my stop below the most recent major HL, any suggestions. My question really applies to crude today.
Thank you
Hey Al, could you talk about your stop strategy for limit orders in the various situations that you use them? Wondering how many times you will add and what you have to see to exit with a loss? Thanks, Bruce
Hi Bruce,
Al’s videos on Orders (32A-32C) and Protective Stops (33A-33G) should hopefully answer your queries. And take a look at the How to Trade videos on Swing and Scalp Trading (49/50) with lots of examples. Other areas of course on Scaling In should also help.
Would take too much space and time for Al to cover everything here, right?
I will watch those again but my recollection is they don’t spend much time on limit order trading or limit order stop placement. Thanks, Bruce
I have suggested to Al he does a Bonus Video on topic which will help. Maybe early next year (ie January/February?).
I agree. Since trade mgmt is so important, a section of videos for scalps and swings with bar by bar trade mgmt would be very helpful. I understand Al has put a tremendous amount of time into the course, but more specific videos on trade mgmt for swings and scalps would be VERY HELPFUL. Always much thanks to Al and his work!