Posted 8:39 a.m.
The Emini opened with a trading range just below the moving average and just above the high of last week. This is a breakout mode open, and a limit order market for scalpers. Most day traders should wait for a strong breakout with follow-through up or down. The swing trade should go for approximately a measured move. Monday, Tuesday, and Wednesday all took about an hour and a half before there was a breakout.
Because of the trading range open and yesterday’s 5 hour trading range, today will probably spend a lot of time within a trading range. Also, the all-time high is only 15 points above and the high of last week is only a couple of points below. Both are magnets and will tend to reduce the extent of moves away from them.
When the Emini is in breakout mode on the open, traders looking to enter before the breakout usually want a strong signal bar. When there is no strong buy or sell signal bar, the probability does not go up until there is a strong breakout with follow-through. Until then, the Emini is in a limit order market.
I waited to post today because I was hoping for a reliable buy or sell signal bar, or a strong breakout, so that the Always In position would be clear and traders could then look for a swing trade. However, there was none in the 1st 2 hours, and the Emini remained in a tight triangle. Traders will simply have to wait for the breakout, which should come soon.
Does the length of the triangle increase the chances for a bigger move? Usually not. It does increase the chances of a trending trading range day where there is a brief breakout for a few bars, and then another trading range.
My thoughts before the open: Day trading strategies at the top of the range
The Emini had a strong rally yesterday, and it is close enough to the all-time high and all-time high close to test one or both today. The bears hope to create a double top and the bulls want a breakout and a measured move up. While a breakout today or within the next week is more likely, the tight trading range on the weekly chart will probably be the final bull flag because the monthly chart is so overbought.
Yesterday’s rally was strong and the bulls will try for follow-through buying today, especially with such important magnets within 10 points above. However, the Emini is still in a trading range on the higher time frames, and trading ranges usually disappoint traders. Even though the Emini has reversed up strongly on the daily chart, it is still in the trading range. Day traders should not be surprised if today is disappointing for the bulls and good for the bears. If the price action is changing from a trading range to a bull trend on the daily chart, the bulls might get a strong follow-through day today. If today is a bad day for the bulls, then day traders will assume that the trading range is still controlling the market.
In addition to magnets above, there are magnets below. Today is Friday so weekly support and resistance can be important. The most important weekly target below is last week’s close. The candlestick pattern on the weekly chart is an outside up bar. The bulls want the Emini to close above last week’s 2106.75 high as a sign of strength. The bears want the opposite.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini was in a bear trending trading range day until 11 a.m. when it had a bear breakout. It reversed up from a wedge bottom, a measured move target, a leg 1 = leg 2 target, a micro wedge, and the 60 minute moving average after a 19 bar bear micro channel. It collapsed into the close, reminding the bulls that the Emini is still in a trading range on the daily chart.
The Emini is close to the all-time high and the momentum up this week was good. The bulls will try to get a breakout to a new all-time high next week. The bears will try to create a lower high. The odds favor the bulls.
Best Forex trading strategies
Traders who are trading Forex for a living will probably mostly scalp today. The 60 minute EURUSD is in a broad bull channel and traders are scalping in both directions. The Pound is strong, but overbought. The 60 minute GBPUSD had a bull breakout above its bull channel and has been sideways for 2 days. If there is a rally in the next day or two, it will probably fail and lead to a Final Flag top for a swing down. Traders learning how to trade the markets can see that both the 60 minute EURJPY and USDJPY are in trading ranges. Online daytraders will scalp and mostly use limit orders.
The 60 minute chart of the USDCAD reversed up strongly yesterday and has some follow-through buying overnight. However, the 5 minute chart is now in a parabolic bull channel. Traders learning how to trade Forex markets can look to buy a complex pullback like a ten bar, two legged high 2 buy (ABC) or a wedge bull flag for a scalp and possibly a swing trade.
The 60 minute AUDUSD has pulled back to the middle of its trading range. Although the 5 minute chart is still in a tight bear channel, it is oversold and it will probably enter a trading range today.
See the weekly update for a discussion of the price action on the weekly candlestick 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, 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.
Hey Al,
I’ve got a question concerning your statement in the last paragraph of today’s intrady update. You say that the length of a triangle does not influence the strength of the following breakout. That is only true if the market is within a TR with big swings and an extended value area, right? The opposite is true for TIGHT TRs, right? Some days ago you said that the longer the market is within a TTR, the higher the odds become for a strong BO that lasts many bars.
Thank you so much in advance,
Paul
My answer is subjective and probably not very clear or helpful. Context is the issue.
When I think of Triangle breakouts, I think in terms of a measured move based on the height more than a move based on the length.
The longer the market is in a TTR, IF the context is good (like at a confluence of support or resistance), the more likely there will be a strong BO with many bars of follow-through. However, most TTRs are not at major support or resistance, and most BOs do not go far.
Hi Al,
I wasn’t in the room yesterday. But if you’re looking for a the best swing potential yesterday, was the best set-up around B53 b/c 1)20 MAG’s, 2) you should get 2LD from Tri & 3)Potential MM from the Tri BO? At the time I was guessing SW ML for the rest of the day and didn’t think a late decent swing was in the cards.
Happy Father’s Day tomorrow,
John
For a swing down, I thought that the bar #53 gap bar (1st bar above the moving average) had a 40-50% chance of another leg down. The bar 49 BO above the MA was barely strong enough to make it slightly more likely that there would be buyers below 53. However, bears sold the 49 close and below 53 because the reward was so much bigger than the risk, and the prob was not much below 50%.
A Tri late in a bear is more often the final flag, and bar 45 might have been the 2nd leg sideways to down. As with most swing trades, the probability is usually less than 50%, but the reward is so big compared to the risk that they are still good trades.
Al–
thanks for the updates.
is a trade from breakout mode approached the same as any breakout trade?
Yes, I trade all breakouts the same. When in breakout mode, there is a 50% chance that the 1st BO will fail and reverse. However, if it is big, there is at least a 60% chance of some kind of measured move and at least 2 legs.