Posted 7:14 a.m.
Today opened with a gap down in an overbought bull trend. Day traders are looking for a strong breakout with follow-through up or down before they are willing to swing trade. Until then, they will mostly scalp. Since 6 of the past 8 days were doji candles on the daily chart, the odds are that today will be like them and have mostly trading range price action. Also, since the bears have been able to scalp profitably by selling bull breakouts for the past several days, the daily chart is becoming more two sided. This also will tend to reduce the chance that this opening rally will lead to a strong bull trend day. Although the Emini is currently always in long, the bulls need consecutive bull trend bars before traders will believe that they will control the rest of the day. Without that, they expect a trading range day and for this rally to be followed by a bear leg and then sideways trading.
The Emini rallied for 5 days after the first pullback in the 14 day bull microchannel. The odds are that it will begin to form a tight trading range on the daily chart. The big gap down closed on the 3rd bar today, but the rally had bad follow-through after the bull bars, and this made the rally more likely a bull leg in a trading range than the start of a bull trend. The bears are hoping that it will lead to an opening reversal at resistance, like the 60 minute moving average and yesterday’s low, and become the high of the day.
Day trading outlook for tomorrow’s Emini price action
The Emini had a weak rally on the open and then tested the low of the day. It reversed up strongly and held near the high for the rest of the day. It failed, however, to get above yesterday’s high.
The Emini reversed up on the open after a gap down, but the rally lacked consecutive strong bull trend bars. This made the rally more likely part of a trading range. There was a strong selloff, but it held above the low and created a double bottom at the 60 minute moving average. The reversal up from there was strong and it became the dominant price action feature of the day. Although the bears tried to create a wedge top, the two legs down became simply a big high 2 ABC bull flag.
Despite the buying pressure, the bulls failed to go above yesterday’s high. The bears hope that today is forming a double top with yesterday’s high. The neck line is today’s low. They want a bear breakout and then a measured move down to test the September high and breakout point. After a 14 day bull microchannel and then a pullback, the market usually enters a trading range for ten or more days. The Emini has rallied for 5 days since that pullback and it might soon pull back to form that trading range. Today’s high below yesterday’s high might be the start of the pullback. However, the bears need a strong bear breakout below yesterday’s low. Otherwise, the bulls are still in control and the bull trend will continue.
The bulls want the double top to fail and for the Emini to rally for a measured move up to the top of the channel on the daily chart, which is around 2045.
Premarket price action analysis
See yesterday’s intraday market update report for today’s premarket analysis. Once there, scroll down to the heading, Day trading outlook for tomorrow’s Emini price action.
See the weekly update for a discussion of 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 Emini price action real-time throughout the day in the BrooksPriceAction.com trading room, and a 2 day free trial is available.
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 Intraday Market Update page.
