Emini and Forex Trading Update:
Tuesday April 28, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini triggered a weekly buy signal yesterday by going above last week’s high. The most important factor currently is the 20 week EMA. There is a 6 week bull micro channel on the weekly chart. That is a strong bull trend. Yesterday, the Emini was just below the EMA, which is a strong magnet. Traders should expect the Emini to get above the 20 week EMA today after the strong rally in the Globex session. The average is currently at 2901.
The entire 6 week rally is probably a bull leg in a 2 1/2 year trading range. Therefore, a bear leg should begin within a couple weeks. However, traders do not expect it to start until the Emini goes at least a little above the 20 week EMA.
Once the bears get their 2 – 3 week selloff, the bulls will buy it. When a 6 week rally is as strong as this one has been, there is a 70% chance that the bulls will buy the 1st reversal down.
Overnight Emini Globex trading
The Emini is up 40 points in the Globex session. It is currently just above the day session’s 20 week EMA.
I have been saying that it would probably get above that price this week. I also said that it could get all the way up to the March 3 lower high before pulling back for a few weeks.
However, it is more likely that it will begin to pull back within a couple weeks. A reversal down from here would be from a clearer wedge top. Traders would have more confidence selling if they get a strong sell signal bar.
3 days in a tight bull channel is extreme
The Emini has rallied in a tight bull channel on the 5 minute chart for 2 days. Today would be the 3rd day. That typically is the outer limit for the duration of a buy climax. Therefore, there is an increased chance of either a trading range or at least a minor reversal coming today or tomorrow.
The overnight bull trend has been in a tight bull channel. There is no sign of a top. But there will probably be a big gap up. If so, the Emini will be far above its 20 bar EMA on the 5 minute chart. Since the bulls do not want to pay too much above the average price and the chart is overbought, there is an increased chance of an early trading range.
Targets for the bulls
The bulls do not need to do more than they have already done overnight. They will probably break above the 20 week EMA on the open. If they can close today above that EMA, they will increase the chance of at least slightly higher prices tomorrow.
They would like the Emini to close far above the EMA. Their next target is 2939.75. That is the February close. If the bulls can get there, they will have completely erased the March pandemic crash.
Traders would then wonder if the rally will continue up to the March 3 lower high. That was the start of the March parabolic bear channel.
Strong bull trend so not great downside risk
The bears know that there are now 3 clear legs up on the daily chart. Also, the rally is at important resistance. They want the break above the 20 week EMA to fail.
But a strong bull trend does not typically become a bear trend without first transitioning into a trading range for a few days Consequently, the downside risk over the next few days is not great. But, the odds favor a 50% correction of the April rally to begin within a few weeks.
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 is reversing up from a higher low major trend reversal. There was a good buy signal bar 2 days ago.
While the entry bar yesterday was only a doji bar, today is an outside up day. The EURUSD traded below yesterday’s low, which triggered a Low 1 sell signal. But it immediately reversed up to above yesterday’s high. This is a sign that the bulls are stronger than the bears.
The EURUSD is probably beginning a 2 – 4 week rally. It is important to remember that the chart has been sideways for 8 months. Every strong leg up and down reversed in about 2 – 4 weeks. Consequently, even though this is a major buy signal, the result will probably be minor. That means another leg in the 8 month trading range instead of the start of a bull trend.
Weekly chart has weak High 2 bull flag
The EURUSD daily chart has been in a smaller trading range for a month within its 8 month range. It might stall at last week’s high.
On the weekly chart, last week is a High 2 buy signal bar. But it is a bear bar in a 7 week tight trading range.
That is a weak buy setup. It increases the chance of more sideways trading. Therefore, the EURUSD might remain stuck below 1.10 for a few weeks before breaking out to test either the March high above or the March low below.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has rallied strongly from below yesterday’s low to above yesterday’s high. The bulls accomplished their goal of creating an outside up day. That increases the chance of higher prices for a week or two.
Their minimum goal for the remainder of the day is to have today close above yesterday’s high. They would like today to close above last week’s high. That would trigger the weekly buy signal. But it is more significant to have a strong outside up candlestick on the daily chart.
It is important to note that the bulls have not bought aggressively above yesterday’s high so far. The 5 minute chart has been in a tight trading range for 4 hours. Since the bears have not yet had a 20 – 30 pip pullback, most traders are only looking to buy. But if the bulls continue to fail to resume the rally, the bears will begin to sell for scalps.
While it is possible for today to reverse back down to below yesterday’s low, there is only a 20% chance. Traders expect today to pay a lot of attention to yesterday’s high. Today might pull back from above yesterday’s high and close in the middle of the range. More likely it will close around yesterday’s high.
Since a trading range in a bull trend is a bull flag, the bulls have a 60% chance of at least a small additional leg up after the early overnight rally. That could then trigger the weekly buy signal.
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 gapped above the 20 week EMA and immediately sold off back down to last week’s high. It then entered a trading range for several hours. The selling resumed into the close and the day closed near the low.
There are now 3 clear legs up on the daily chart. This is a wedge rally, which is a type of buy climax. That typically attracts profit taking. Consequently, a 2 – 3 week pullback should begin by the end of next week.
Today is a sell signal bar for tomorrow. But when a rally is strong like it has been on the daily chart, the Emini often has to go sideways for a few days before it goes down. Therefore, there might not be a lot of sellers below today’s low. The bears might wait for tomorrow’s FOMC announcement or for next week after they see how this week closes.
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.
Hey Al
I viewed bar 4 as a second sell for failed breakout above yesterday’s high but then bar 5 made it a triangle so 50% of those breakouts fail therefore it delayed me getting short for a little. Can you comment on the logic you would use in this case?
I took the short because there were 2 good signal signal bars for a Low 2 top. And, very importantly, I have been saying for the past week that the rally would probably poke above the 20 week EMA and reverse down. Here, there were 2 reversals down on the open from above my target.
Patterns on the open usually have something to make traders not take the trade. I agree about the triangle, but this was as good as we are going to get.
I don’t know if it was the correct action, but I set a sell @ the 20-Week EMA 2911 per your recommendation, which coincided with a price collision in the hourly 20 bar BB 3 Std Dev. I closed EOD because the price was below the center BB, not knowing a better reason or pattern. Is this the start of the 2-3 Week correction or do you see it heading back to the 20 Week EMA @2939?
I just enrolled in your course and looking forward to getting access to the Trading Room. Can you provide any guidance on when I might have sold another contract or should I have started with the largest position?
The NFA does not allow me to advise anyone on trading decisions without me first registering with them. At this point in my life, I cannot add any more to what I am doing. Dealing with compliance requirements and forms is too much work with no benefit, and I therefore will not register.
There are many factors that determine how to manage a trade. For example, as a day trade, selling at the high and taking profits near the low is great.
For a swing down on the daily charts for 2 – 3 weeks, management is more complicated. Because the daily chart is in a trading range, turning points are often not clear. Some traders use wide stops, trade small, and scale into shorts.
Thanks so much for your explanation Al.
Greatly appreciate the training you offer!
How do you know how far this to go down? What indiciators, reversal signals are you looking for to close out short positions after today’s drop.
In my opinion, bar 15 it is a very good breakout of yestarday’s high, bar 16 it is a bad follow through bar, during a breakout, an opposite bar as 16 means that between 1-3 bars there might be a pullback, in fact, 3 bars later a big bull bar 19 and a good follow through bar 20. Another point, it is that 80% of days are opening reversals, meaning that exactly after an hour and a half, the price tends to change its behavior, and it is what happened today. All this said, i am sure Al have much better reasons and all written above were just some interpretation of his work that I might underperformed.
Finally we have a proper wedge and a nice bounce down off of it. Lets go to 2600, shall we now? 🙂
Probably the reversal down will start soon. It might have begun today.