Emini reversal after failed breakout below OO pattern

Trading Update: Monday February 28, 2022

Emini pre-open market analysis

Emini daily chart

• The Emini broke below the January low last week, followed by reversal after failed breakout.
• The selloff last week was also a test of the 7-month trading range.
• The bulls hope that the February 24 strong buy signal bar and the follow-through bar on the 25th are strong enough to end the 2-month correction.
• The reversal up last week was so strong that a new low would probably not fall all that far before it reverses up.
• The bulls have a wedge bull flag with the December 3, January 4, and February 24. The bulls are hopeful that this rally will lead to two legs up at a minimum.
• As Al said last week, two important things are currently not known.
• First is, will last week be the final low in the two-month correction, or will there be a bounce followed by a second leg down.
• The second is once the selloff ends, will the bull trend resume, or will the Emini go sideways for several months or possibly a year.
• Since the market is still in a trading range, it is still very possible the market has to fall below last week’s low and test the 4,000 big round number, which would also be very close to a 20% correction of 3,846 (based on the March contract).
• As Al said last week, there is only a 30% chance of this selloff continuing down and testing the pre-pandemic high back from February 2020, which would be around a 30% correction.

Emini 5-minute chart and what to expect today

• Emini is down 50 points in the overnight Globex session.
• The market had a large 80 point gap down on the Globex open yesterday evening and formed a double bottom.
• Since last night, the market has been in a bull trend; however, the rally has started to develop selling pressure on the 5-minute chart.
• Since the day session will likely gap down around 50 points from Friday’s close, traders should expect a trading range open.
• In a new bull trend, the bulls will see this gap down as a higher low. They will want a series of higher lows and higher highs, confirming the bull trend.
• The bears will see this gap down as a reversal attempt. The bears hope that it will be followed by at least a trading range and a series of lower highs and lower lows (bear trend) that will take the market below last week’s low.
• Overall, traders should expect a trading range open and wait for a credible stop entry or a strong breakout with follow-through.

Friday’s Emini setups

Al created the SP500 Emini charts.

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. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

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

• The bulls gapped below Friday’s low, triggering a low 1 signal on the daily chart. Currently, the market is reversing up, and bulls want the market to go outside up and close above Friday.
• Last week broke below the January close; however, the market failed to close below it, and on Friday, the market reversed up strongly.
• Last week broke below the January close; however, the market failed to close below it, and on Friday, the market reversed up strongly.
• While the bears are hopeful that they will get a 400-pip measured move down based on the height of the TR soon, the odds favor any breakout attempts to the downside failing.
• Since we are in a 3-month trading range, the odds are that the market will continue sideways.
• The EURUSD is in a trading range on the higher time frames and has had a selloff for over 7-months. This means that the bulls should get a rally for at least a few months.
• The odds still slightly favor a measured move up of the 3-month trading range and a test of the October 2021 highs.
• The bulls need signs of strength similar to what they achieved on the first week of February on the daily chart.
• If the bulls can get strong consecutive bull bars closing on their highs, traders will begin to believe that the upside breakout will happen soon.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

• I will post chart after the close.

Al created the SP500 Emini charts.

End of day summary

• The market formed a double bottom on the open, leading to a bull breakout and measured move up testing the high of Friday.
• Bar 25 led to a wedge top following consecutive buy climaxes and a possible failed breakout of the high of the day—most bulls exit below 25.
• The market formed an LH MTR on bar 31. Although the signal bar was weak and the reversal down was likely to be minor, the bears got a surprise entry bar which made traders expect at least a couple of more legs sideways to down at a minimum.
• The bears formed a parabolic wedge bottom with a second entry buy on bar 42. Most bears would exit however the reversal up was probably minor due to how tight the bear channel was.
• On bar 54 the market formed a triangle which is a breakout mode pattern.
• The bears got a bear breakout to a new low of the day on bar 56; however, the market went sideways.
• The bears had several attempts at a wedge top; however, the bulls ultimately won and got a bull breakout above the bear flag (Bar 72) and rallied into the close.

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

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 on trading room days. We offer a 2 day free trial.

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Charts use Pacific Time

When I mention time, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.

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