Emini and Forex Trading Update:
Thursday February 13, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini made another new all-time high yesterday but traded in a trading range for most of the day. The bulls got a late rally into the close.
There is a wedge top on the daily chart. The 4% selloff in January makes it possible that this rally is a bull leg in what will be a trading range that began around Christmas. Traders expect that there might be a test of the January low by the end of March.
However, if the bulls get a couple closes above 3400, the rally might reach the Leg 1 = Leg 2 target of 3468 on the weekly chart. That would also be around a measured move up based on the height of the January range.
Bull leg in trading range or resumption of bull trend?
Traders are deciding whether the 2 week rally is a leg up in a trading range that began at Christmas or a resumption of the 5 month bull trend. If the bulls get a couple closes above 3400, the odds will favor a bull trend.
But if the bears get a reversal down over the next few days, traders will look for a test of the January low by the end of March. Currently, the bear case is slightly more likely.
Overnight Emini Globex trading
The Emini is down 17 points in the Globex session. It therefore might gap down below yesterday’s low. Most gaps are minor and small gaps usually close before the end of the day.
But since the Emini might be forming the top of a 2 month trading range, there is an increased chance of a Bear Surprise Day. That is a surprisingly big bear day, which often will lead to follow-through selling.
Is there also an increased chance of a big bull day? Probably not. There is uncertainty. When that is the case and the Emini has rallied for a couple weeks, rallies attract sellers. That reduces the chance of a Bull Surprise from this level.
There has been a lot of trading range trading for a couple of weeks. This was especially true yesterday. That increases the chance or more trading range trading today. But traders should always be ready for a relentless trend day up or down.
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.
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 broke below the October 1 low. That was the low in the 2 year bear trend and the bottom of the 6 month trading range.
Traders bought every prior new low for 2 years and got a 2 – 3 week, 200 – 300 pip rally. They expect the bears to take profits soon, as they have done in the past. This especially true since today fell just below the measured move target from the January head and shoulders top.
The bulls tried to get a reversal up 2 days ago and failed. When that happens in a sell climax and there is another big bear bar, like yesterday, there is usually a 2nd attempt within 2 – 3 days. Consequently, traders will be looking for a reversal up this week.
Short covering rally likely soon
If the bears take profits, they will not look to sell again 2 – 3 days later. Instead, they usually wait for about 10 days. They want to see if the bulls can get a reversal up. The bears usually will give the bulls 2 chances. The result is typically a 2 legged rally lasting about 10 days and testing resistance. That means the 20 day EMA and possibly the neck line of the head and shoulders top around 1.10.
There is no reversal yet and therefore traders expect at least slightly lower prices. The EURUSD might fall to the next support at around 1.08 before the short covering begins. But it usually begins within 3 days of the 1st attempt, which was Tuesday. Therefore there is an increased chance of a bull trend reversal bar this week and then the start of a 2 week rally.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off 35 pips over the past 2 hours to below the neck line of the January head and shoulders top. Remember, there are still magnets below at around 1.08 and the 2 week sell climax has been strong. Consequently, there is an increased chance of a plunge down to that support.
However, Tuesday’s reversal attempt on the daily chart increases the chance of a 1 – 2 week rally beginning within the next few days. Therefore, if the bulls get a reversal up, they will be more willing to swing trade part of their position.
The overnight range has been small. That reduces the chance of a big trend today. But the bulls will try to get a reversal up and a close above the open. They want today or tomorrow to have a bull body on the daily chart and a close near the high. If they get it, that bull trend reversal bar will increase the chance of a couple weeks of short covering.
The bears want to close the gap on the daily chart by falling below 1.0777. But Tuesday’s bull body makes it more likely that there will be a short-covering rally 1st.
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.
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 forming a double bottom below yesterday’s low, the Emini rallied to above yesterday’s high. It was an outside up day and it formed another all-time high. There was a midday reversal down after a wedge rally and the Emini closed in the middle of its range. It formed a trending trading range day.
The rally since January 29 is in a wedge. But there is no top yet and therefore traders continue to expect higher prices.
Tomorrow is Friday, but there is no nearby weekly support or resistance. The bulls will simply try to get the week to close near the high.
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.
