Emini and Forex Trading Update:
Thursday February 18, 2021
I will update again at the end of the day.
Pre-Open market analysis
Yesterday fell below Tuesday’s low, which triggered a sell signal on the daily chart. The bears want a mid-month reversal and for February to close below the open of the month. However, the bulls bought the sell signal, and yesterday became a bull day that closed near its high. It is now a High 1 bull flag buy signal bar for today, a February buy climax.
The bulls want the yearlong rally to continue to above the 4,000 Big Round Number. But the Emini is at the top of a 7-day tight trading range. Also, because the rally is climactic and at the top of channels on the daily and weekly chart, traders know that a 10% correction can come at any time. I continue to repeat that traders will continue to buy every 2- to 3-day reversal down until there are consecutive big bear bars on the daily chart.
Overnight Emini Globex trading
The Emini is down 24 points in the Globex session. It is again testing the 3,900 Big Round Number and the bottom of the 7-day trading range.
Today will gap far below yesterday’s close and it might gap below yesterday’s low. If it does gap below yesterday’s low, the gap will probably be small. Small gaps typically close in the 1st hour.
Because of the extreme buy climax on the daily, weekly, and monthly charts, everyone knows that a 10% reversal can begin at any time. That will probably begin with a couple big bear trend days. If there is a series of strong bear bars in the 1st hour, there will be an increased chance of a bear trend day today.
If today is a big bear day, there will be many buy signal bars on the way down. Strong trends are always forming reversal patterns to trap bears out of good shorts, and bulls into bad longs. Day traders should either rely on stops above the top of the most recent leg down, or continue to sell again below a bear bar after each 1- to 3-bar reversal up.
Can today be a bull trend day? Any day can be a trend day in either direction. But with yesterday being a buy signal bar on the daily chart, and today opening near yesterday’s low instead of near its high, the chance of a strong bull day today is less.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has been in a trading range since mid-January. It is therefore in Breakout Mode.
Every trading range always has both a reasonable buy and sell setup. The bulls see today as a reversal up from the right shoulder of a Head and Shoulders Bottom bull flag. They need consecutive closes above the January 22 neckline.
For the bears, today is a pullback from yesterday’s reversal down from a double top bear flag. They need consecutive closes below the February 5 neckline.
So which side will win? The EURUSD could not be in a trading range if either side had a significant advantage. The bulls have an edge for a few days, and then the bears have the edge for a few days. Neither side so far is strong enough to create a sustained move. Traders will continue to look for reversals until there is a clear breakout.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been rallying overnight, and the rally has reversed more than half of yesterday’s selloff. The rally has been strong enough for day traders to only be buying.
However, it has had a couple trading ranges that lasted more than an hour. That reduces the chance that the rally will continue all day.
But until there is at least a 20-pip pullback, day traders will only buy. Once there is a 20-pip pullback, day traders will expect the bull trend to evolve into a trading range. At that point, they will also be willing to sell reversals down for 10-pip scalps, in addition to buying pullbacks for scalps. Neither a big reversal down or a significant additional rally are likely.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini sold off on the open, but reversed up from a wedge bottom just above last week’s low. The reversal prevented this week from becoming an outside down bar on the weekly chart.
After going sideways for a couple hours, it rallied from a higher low major trend reversal. It stalled at the 60-minute EMA at the end of the day.
Today is a bull bar on the daily chart. It is a High 1 bull flag buy signal bar for tomorrow. But since the Emini has been in a tight trading range for 8 days, there might be more sellers than buyers above its high.
Tomorrow is Friday so weekly support and resistance can be important, especially in the final hour. The bulls want the week to close above last week’s high at a new all-time high.
However, the bears want the week to close on its low and below last week’s low. It would then be an outside down bar on the weekly chart, which would increase the chance of lower prices next week.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.