Emini and Forex Trading Update:
Thursday April 23, 2020
I will update again at the end of the day.
Pre-Open market analysis
On Monday, the Emini turned down from a wedge top on the 60 minute and daily charts. Yesterday’s rally retraced half of this week’s selloff. However, the Emini collapsed at the end of the day and the day was a doji bar on the daily chart. Traders should expect the Emini to pull back to between 2500 and 2600 within a few weeks.
It is important to know that it is common for the 1st reversal down from a wedge top to fail. Consequently, the Emini might rally to above last week’s high before beginning its 2 – 3 week correction.
Because the 5 week rally has been strong, traders should expect buyers to come back at around halfway down, between 2500 and 2600. Furthermore, they should expect a trading range for the remainder of the year.
Overnight Emini Globex trading
The Emini is up 18 points in the Globex session. It will probably open near yesterday’s high. The bulls want April to get above the February close. It would then have completely erased the March selloff.
Because the 2 month rally has been so strong, the bulls have a reasonable chance of achieving their goal. Traders will be ready to buy a strong breakout above 2800.
But traders expect the bulls to give up soon. They know that the rally is probably a leg in a yearlong trading range and not a resumption of the bull trend. If they give up, there will be one or more big bear trend days. That is how bear legs typically begin.
Since most days over the past 2 weeks have at least one trend up and one trend down, day traders will continue to look for reversals.
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 EURUSD Forex market on the daily chart has broken below a triangle and now below the April 6 higher low. The bears are hoping that this is a resumption of the March 23 bear trend. They want a series of bear bars to continue to far below the March 23 low and then down to par (1.0).
But look at the bodies in the legs down. They were very big in the leg down to the March 23 low, and fairly big in the leg down to the April 6 low. Also, both legs had many consecutive big bear bodies.
However, the selloff from the April 15 high had only 2 bear bars. Both were smaller and had prominent tails below. Finally, the bear breakout of the past 2 days is even smaller.
Traders see that the attempts to sell off are getting weaker. That will make bears less interested at selling at the bottom of a leg down. Furthermore, the bulls will begin to buy.
This is trading range price action. It reduces the chance that the 2 week selloff is a resumption of the March 23 bear trend.
It is important to note that the daily chart has been in a trading range for 8 months. Trading ranges resist breaking out. There have been many strong legs up and down. Each reversed and the trading range continued.
Traders expect this bear breakout to fail and reverse. But there is no sign of a reversal yet.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market continued its 2 day selloff overnight. But the bars have been small and there have rarely been more than a couple consecutive big bear bars. This selloff lacks conviction. Traders expect it to end today or tomorrow.
When a bear trend ends, the chart evolves either into a trading range or it reverses into a bull trend. Over the past 6 hours, the bars look like they are entering a trading range. Day traders have been scalping, expecting reversals.
Since today broke below a higher low (April 6) on the daily chart, there is an increased chance of a trend up or down. If the trend was going to be down, it probably would have begun soon after the breakout many hours ago. Therefore, if there is going to be a trend, up is more likely. However, there is so little energy that traders will continue to scalp unless there is a surprising big move 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 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 broke above the open of the week, but reversed down. It was another failed test of the 50 day moving average.
After collapsing to a new low, it entered a trading range. Today was a trending trading range day and it closed on its low. It is a sell signal bar for tomorrow on the daily chart.
The bears have a credible wedge top. Today was a lower high. Traders expect a 2 – 3 week selloff to below 2600. It might have already begun, but there might be one more push up to a new April high first.
This week so far is an inside bar on the weekly chart. That makes is a High 1 buy signal bar for next week. But the rally is climactic and the 20 week EMA is just above. If next week is higher, the rally will probably fail at around the 20 week EMA.
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.
