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Emini testing bull channel top at end of August

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Trading Update: Tuesday August 24, 2021

Emini pre-open market analysis

Emini daily chart

  • Yesterday was the 3rd consecutive big bull day closing near its high, and at another new all-time high, with Emini testing bull channel top.
  • Next target is 4500 Big Round Number, which is also around the top of the bull channel on the daily chart.
  • Above that, there is resistance at the measured move at 4537 based on the pandemic crash (February 19, 2020 high to March 23, 2020 low).
  • When there is a tight bull channel, there is an increased chance of a big break above the channel and then a reversal down. That is a blow-off top, and it would probably lead to at least a couple months of sideways to down trading.
  • Until there is a clear top, traders continue to buy, correctly betting on higher prices.
  • The bears want the month to close below the open of the month at 4408.00. There are 5 trading days remaining in August, and that is within reach.

Emini 5-minute chart and what to expect today

  • Emini is up 4 points in the overnight Globex session.
  • Yesterday was a buy climax day. There is only a 25% chance today will be another Small Pullback Bull Trend Day.
  • In addition, there is a 75% chance of at least a couple hours of sideways to down trading starting by the end of the 2nd hour. This is true even though the 2nd half of yesterday already formed a trading range.
  • The bears see a lower high major trend reversal in that trading range and hope for a break below the trading range today.
  • The bears want a reversal down after 3 strong days up, but bulls will buy the 1st 1- to 3-day pullback.
  • A trading range is Breakout Mode. That means there is about a 50% chance of a successful breakout up or down, and a 50% chance that the 1st breakout will fail and reverse.

Yesterday’s Emini setups

Emini small pullback bull trend from the open at all-time high. Emini testing bull channel top.

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. Buyers of both 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. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

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

EURUSD Forex daily chart

EURUSD Forex reversal up needs breakout above lower high
  • I mentioned over the weekend that the EURUSD should bounce this week. Yesterday reversed up strongly.
  • If the bulls get follow-through buying today, Friday’s low could be the low for the next month. So far, today is a doji inside bar, which is not strong follow-through. However, as long as today does not have a bear body, traders will expect at least slightly higher prices tomorrow.
  • If today is a doji bar or a bear bar, there might be one more new low before the bulls get a month-long rally.
  • A reversal up from a new low would be from a 2nd consecutive wedge bottom (the 1st ended on July 21). That is a higher probability reversal pattern.
  • The bear trend is intact as long as there are lower highs. The bulls need a strong break above the August 13 lower high before traders will believe that the bear trend might have ended.
  • The bears hope that yesterday was a bull trap. They want a reversal down today and then a break below the November low over the next couple weeks. It is the bottom of a yearlong trading range. If today is a bear bar closing near its low, it will be a Low 1 sell signal bar for tomorrow. Traders will suspect that yesterday was just a failed reversal attempt (a bull trap).
  • Since most trading range breakouts fail, there will probably be more buyers than sellers below that low.
  • Because the EURUSD is in the buy zone at the bottom of the trading range, the odds favor a rally lasting several weeks. This is true even if there is one more new low first.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

Emini trading range day with OO and ii patterns

End of day summary

  • After 3 big bull days, today was a trading range day. There were many small, tight trading ranges with small Breakout Mode Patterns (OO, ii, ioi, ledges), but none led to a big trend.
  • After the 3-day rally, the bulls want Trend Resumption Up. They expect a breakout above the bull channel on the daily chart, which is around the 4500 Big Round Number and just above today’s high.
  • The bears want a higher high double top with the August 16 high, but will probably need a micro double top before there is more than a 1- to 3-day pullback.
  • There are 5 trading days remaining in August. So far, August is the 7th consecutive bull bar on the monthly chart, which is unusual. The open of the month is about 100 points below and therefore within reach by the end of the month.
  • If the bears get a bear bar on the monthly chart this month or next, especially one with a close near the low, it will probably be the start of a 2- to 3-month pullback.
  • If August is a bull bar, September should be a bear bar because there have never been 8 consecutive bull bars on the monthly chart. If it is, it will then probably be the start of the pullback.
  • Until there is a strong reversal down, the bulls will continue to buy every 1- to 3-day selloff, even if the bear bars are big. That has been a profitable strategy for over a year.

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 Time

When I mention time, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.

  • When it comes to double top i can understand the market is in a transition phase,probability becomes and bulls get trapped sometime.
    like this is there any logic behind a channel behaviour or 3 push pattern.
    why always or most of the time there are 3 push up before there is reversal in a bull channel?

    • A wedge is similar to a double top. It takes 2 points to create a line. A bull channel is contained between 2 lines. A third leg up is the test of that line. In a double top, the 2nd leg up is a test of the prior high. Therefore, the 3rd leg of a wedge is similar to the 2nd leg of a double top… both are tests of resistance.

  • Dear Al,

    Could buying bar 3 be seen as H1 after OO (Bar 81 of yesterday – Bar 1 – Bar 2) and above EMA and also above new bull trend line from bar 79 of yesterday and bar 2?

    Thank you.

    • 3 was a High 1 both in the trend that began yesterday and the trend that began today with 2 and 3. The 2 closes above the EMA with the 2nd one being a big bar closing near its high were significant.

  • Hi Al,

    I don’t understand why several trades from today were good trades. Why buying above doji bar 8 just 4 ticks bellow yesterday high and at the top of the trading rage after so many bars with big tails is a good trade? You always say you don’t want to buy at the top of anything. Also why sell bellow bar 76 right at the open of the day magnet. Or bellow 77 after we saw bar 25 failing in the same situation and this time with no time left to scale in higher. Thank you.

    • The Emini established a direction with 2 and 3. There was then an OO. If the Emini went above 8, it would probably continue up to above the OO, which is a Breakout Mode pattern.

      The bears selling below 76 were looking for a Sell The Close trend to below the Globex low. 90% of days break out of the Globex range, and some do it on the final few bars with a strong trend at the end of the day.

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