Emini breakout above 4-week tight trading range needs follow-through

Emini and Forex Trading Update:
Monday May 10, 2021

Pre-Open market analysis of daily chart

• Friday broke above 4-week tight trading range, and closed near the high of the day and of the week.
• Bulls need follow-through buying today or tomorrow to confirm Friday’s breakout. If they get it, traders will look for 100-point measured move up, based on height of 4-week trading range.
• Bears want breakout to fail. They need a bear bar closing near its low today.
• Most days for past month have had at least one swing up and one swing down, so that is most likely today.
• However, since market is deciding between a breakout and a reversal, there is an increased chance of a trend day in either direction.
• Consecutive strong bull bars on Thursday and Friday make successful breakout more likely.
• If there is a series of strong trend bars in either direction in the 1^st hour, traders will expect a trend day.

Overnight Emini Globex trading on 5-minute chart

• Up 1 point in the Globex session, so today might have a small gap up. But, small gaps typically close in the 1^st hour.
• The 2-day rally has had 2 strong legs up. There should be at least a 3^rd small leg up today. If there is, the trend will probably be weaker than the legs up on Thursday and Friday, since trends tend to weaken as they age. Traders become more interested in taking profits on rallies and waiting for pullbacks to buy.
• Friday’s tight trading range on the 5-minute chart is late in the 2-day bull trend. It is therefore a good candidate for a Final Bull Flag. If the rally resumes today, day traders will look for a sell signal, and a reversal back down into Friday’s tight trading range.
• 20% chance that today could sell off from the open, because Friday’s trading range had a double top. This could lead to a big bear day.
• Increased risk of at least one reversal today, because bulls will probably take profits on a rally for a Final Flag top, and bulls will buy a sharp selloff after a strong 2-day rally.
• If there is a series of strong trend bars in the 1^st hour up or down, day traders will look for a trend day.

Friday’s Emini setups

Here are several reasonable stop entry setups from Friday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both 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

EURUSD Forex daily chart

• Strong rally for 6 weeks, but near top of 9-month trading range.
• Trading ranges resist breaking out, so there should be at least a 2-week swing down, before there is a strong break above the January 6 high at the top of the range.
• Last week had consecutive very big bull Surprise Bars. They were strong enough for traders to expect at least a small 2^nd leg up after the 1st 1- to 3-day pullback.
• If there is a reversal down this week, it will be from a wedge rally to a double top with the February 25 high. The reversal would probably last a couple weeks and test the bottom of the most recent buy climax, which is the May 5 low.

Overnight EURUSD Forex trading on 5-minute chart

• Broke a little above last week’s high overnight, but the overnight range has also been small.
• Day traders have only been scalping.
• With last week’s rally being so strong, day traders are more interested in buying pullbacks than selling rallies. However, there was a 40-pip selloff overnight, and that is big enough for day traders to also look for shorts to scalp.
• These factors reduce the chance of a 3^rd big bull day today: the overnight range has been small; the rally is stalling at the top of the wedge bull channel; and, Thursday and Friday were extreme big bull days, which will increase the chance of profit taking on rallies today.
• After such a strong 2-day rally, the EURUSD will probably need to go sideways for a couple days, before it can go down for a swing. Therefore, traders do not expect a strong bear trend day today.
• Day traders will continue to scalp today, unless there is a series of strong trend bars up or down, but that is unlikely.

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. Buyers of both 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

• Trading range open.
• Wedge bottom led to rally to just below high of day.
• Reversal down from double top began with big Bear Surprise bar.
• Not clearly Always In Short until after about 5 consecutive closes below EMA.
• Late breakout to new low of day. Then, measured move down to below open of month, 60-minute EMA, and 4,200 Big Round Number.
• 13-bar bear micro channel was exhaustive sell climax, and bear trend evolved into trading range at end of day.
• Fell below 50% pullback of Thursday/Friday rally at the end of the day.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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Trading Room

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Charts use Pacific Time

When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.

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