Emini and Forex Trading Update:
Friday February 19, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday reversed up strongly from just above last week’s low. This prevented the week from being an outside down bar on the weekly chart. It also increases the chance that today might try to test last week’s high.
The Emini formed a bull bar on the daily chart, and it is a High 1 bull flag buy signal bar for today. But the Emini has been in a tight trading range for 8 days. That lowers the probability of a big bull day today.
Today is Friday so weekly support and resistance can be important, especially in the final hour. If the week closes on the high and above last week’s high, traders will expect higher prices next week. If the week closes below last week’s low, the week will be an outside down bar on the weekly chart. That would increase the chance of lower prices next week.
Overnight Emini Globex trading
The Emini is up 20 points in the Globex session so it will probably gap up on the open. The past 2 weeks gapped up on the weekly chart, even though both gaps quickly closed. If the Emini closes near the high of the day, it would increase the chance of a gap up again next week. The bulls would like today to close at a new all-time high. That would further increase the chance of higher prices on Monday.
Can the Emini reverse down and form a bear day today? It might since it will open near the top of an 8-day tight trading range.
With the Emini being sideways for 8 days, there is a reduced chance of a strong trend day today. However, if there is a series of strong trend bars up or down in the 1st hour, the odds of a trend day will go up.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart is turning up from a higher low. Six days ago, I said that the rally would correct down to around the January 1 low and then have a 2nd leg sideways to up. This is that leg.
What traders will find out over the next week, is whether this rally will reach the January 6 high at the top of the 3-month trading range, or reverse down to the February 5 low at the bottom. Trading ranges are neutral. They are bullish for a few days, and then bearish for a few days, but most breakout attempts fail.
They always eventually break out, but betting that any one leg will grow into a successful breakout is a low probability wager. Traders continue to buy low, sell high, and take quick profits until there are consecutive closes above or below the range. They then switch to trend trading.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been rallying overnight. It broke above yesterday’s high, which triggered a High 1 bull flag buy signal on the daily chart.
Because the rally has been strong, day traders have only been buying. However, it has been sideways for several hours, which means that bulls are starting to take profits on tests of the most recent high.
The trading range is less than 20 pips tall. That makes it difficult for day traders to make money selling. However, with the many reversals down over the past few hours, some day traders are beginning to sell. It is usually better not to sell until after there has been at least a 20- to 30-pip pullback. That is because a day trader typically needs that much of a selloff to make a minimum scalp, which is 10 pips.
This is Friday, and the EURUSD is back at the open of the week. This week is therefore a perfect doji bar on the weekly chart, and the chart has been sideways for 3 weeks. With the overnight rally stalling at the open of the week, there is an increased chance that the day will stay sideways, and the week will close near the open.
Can the rally resume and break above the February 16 lower high? Yes, but it probably will not.
Can today reverse down and close near the low of the day, creating a triangle on the daily chart? A reversal down is less likely when a rally is as strong as the overnight rally has been.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini had a triangle open. The bull breakout failed and the Emini sold off to below the midpoint of the week. It then formed another trading range, and today was a bear trending trading range day. Because it closed below the midpoint of the week, it slightly increases the chance of lower prices next week.
The Emini has now been in a tight trading range for 9 days. That makes more sideways trading likely on Monday. Traders are deciding if the bulls will get a break above 4,000 or take profits, which could lead to a 10% correction. Until there are consecutive strong bear days, the odds favor higher prices, despite the extreme buy climax.
Next week is the final week of the month. The bulls want the month to end of the high, which would increase the chance of higher prices in March. The bears, however, want a selloff into the end of the month because that would increase the chance of lower prices in March.
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.