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<\/a><\/p>\nThe EURUSD daily Forex chart is in a tight trading range and therefore in breakout mode. The measured move targets are about 180 pips up and down. The measured move target for the Head and Shoulders top (always a trading range) is about 250 pips below the March 10 strong bull reversal day.<\/p>\n
The daily EURUSD Forex chart formed an inside day yesterday after Friday’s big bear trend day. That is a signal bar for the bulls and bears. The EURUSD broke below last night, triggering the sell signal. However, it is still within the month-long trading range. The month-long trading range has a double bottom and double top. It is also a triangle, where the 1st push down is the June 24 sell climax. <\/p>\n
While the candlestick pattern has several names, everyone agrees on one thing. As a result of a month within a tight trading range, the EURUSD is in Breakout Mode. This means that there is about a 50% chance of either a bull or bear breakout. Furthermore, there is a 50% chance that the first breakout will fail and reverse. <\/p>\n
The target for breakout traders is about a 180 pip measured move, which is the approximate height of the trading range. Until there is a breakout, there is no breakout. Most days will have mostly trading range price action, and most day traders will mostly scalp.<\/p>\n
European Session<\/h3>\n
The EURUSD Forex market has dropped about 60 pips in the past 2 hours. It is just above the neck line of the double top of the month-long bear flag. The bears want the bear breakout and a measured move down. The target is just below the March 10 bottom of the big bull trend reversal. <\/p>\n
When a market breaks below an important bar like that, there is a 50% chance of a strong breakout. Yet, there is also a 50% chance of a failed breakout and a reversal up. If the bears get their strong breakout, they would then look for a measured move down based on the 400 pip height of the bar.<\/p>\n
The bulls are hoping that the overnight selloff is just a sell vacuum test of the bottom of the month-long range. They want a reversal up, which would create a double bottom higher low major trend reversal setup. <\/p>\n
5 minute chart<\/h3>\n
The selloff on the 5 minute chart is in a wedge bear channel. This is a reversal pattern, and good for the bulls. Because the channel is so tight, the 1st reversal up would probably be minor. This means that it will probably fail after 5 – 20 bars and reverse back down. The bulls then might be able to create a major trend reversal. The momentum down has been strong enough so that the best the bulls can reasonably hope to get over the next 2 hours is a bounce in a trading range. <\/p>\n
As a result of the wedge bear channel being at support, the bears will probably take profits and look to sell a 20 – 30 pip bounce. While the bears might swing part, they see that the EURUSD is at the bottom of a trading range. Most bears will scalp at least half of their position.<\/p>\n
In conclusion, the 5 minute chart will probably enter a trading range for at least 2 hours. Most trading range breakouts fail. As a result, the odds are that this attempt will fail as well and reverse back up. All trading ranges eventually break out. Until there is a strong breakout with follow-through, Forex day traders will bet on reversals.<\/p>\n
Summary of today’s S&P Emini futures price action and what to expect tomorrow<\/h2>\n
This is the daily chart of the Emini. The Emini traded below yesterday’s low and triggered a sell sign. Yet, as I wrote this morning, the bulls bought yesterday’s low. Today is a buy signal for tomorrow, but any rally will probably last only 1 – 3 days before institutions take partial profits.<\/p>\n As expected, yesterday’s sell signal was meaningless. Bulls bought the low, but without enthusiasm. The Emini has been in a tight trading range for 4 days. Even if tomorrow breaks above today’s high, the odds are that the trading range will last at least a couple more day. The 2 week rally was so strong that most institutions will not raise their stops until there are more bars in the bull flag. <\/p>\n As a result of their interest in reducing their position sizes, they will probably sell above today’s high and above the all time high to take partial profits. Consequently, a rally will probably only last 1 – 3 days. They will wait to raise their stops until after a bigger pullback and then a strong breakout to a new high. This means that the bull trend will probably not resume for at least another day or two.<\/p>\n See the weekly update<\/a> for a discussion of the price action on the weekly candlestick chart and for what to expect going into next week.<\/p>\n Traders can see the end of the day bar-by-bar price action report by signing up<\/a> 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<\/a>. We offer a 2 day free trial<\/a>.<\/p>\n<\/a><\/p>\nInstitutions will probably take profits on a rally<\/h3>\n
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