Trading Update: Wednesday July 20, 2022
Emini pre-open market analysis
Emini daily chart
- The bulls had a strong breakout yesterday, closing above the July 8 high. The bulls need to get strong follow-through today to convince traders that the market is going higher.
- Bulls want yesterday to lead to a successful breakout of the neckline (July 8) of the double bottom (June 30 and July 14).
- The bears want today to have a strong bear close, possibly double top with June 27th.
- The bulls have a 4-bar bull micro channel, so the first reversal down may fail.
- Bulls had a strong breakout bar on July 15th, which led to bad follow-through the next day. This may be a sign that today will have bad follow-through as well.
- The bulls need follow-through up here to convince traders that the market is going to get the measured move up of the double bottom (June 30 and July 14) and test of 4,000 big round number as well as the June major lower high.
- At the moment, this looks good for the bulls. The buying pressure looks strong (lots of bull bars over the past few weeks), which increases the probability for the bulls.
- Today will be an important day, as the bulls try their best to get a strong bull close today, which would be follow-through following yesterday’s bull breakout.
- Bears want the opposite and to create as big of a bear bar as possible.
- If the bears successfully get a big bear bar today, that might be enough for bulls to exit below and look to buy again lower.
- The bears still have a chance of getting a double top bear flag, but they need to prevent the bulls from getting follow-through today, or else the bears may give up.
- There are two possible measuring gaps (July 8 and July 18). The bulls will try their best to keep these gaps open, and the bears want to close them.
- Overall, as stated above, the bulls need follow-through today. At the moment, the breakout is probably strong enough to lead to a second leg up. However, it is possible today is a big bear trend day which could trap the bulls.
Emini 5-minute chart and what to expect today
- Emini is down 10 points in the overnight Globex session.
- The Globex market has been in a broad bear channel for several hours. The bulls had a bull channel late in the day and during some of last night’s Globex session.
- Bull channels eventually get a bear breakout and evolve into trading ranges which is what is going on now.
- Today will be an important day. The bulls have a strong bull breakout closing above the July 8th high, which is the neckline of a double bottom. Bulls need follow-through to convince traders that they are going to succeed.
- The bears want the opposite and hope today is a strong bear trend day which might trap the bulls and create a double top on the daily chart.
- Traders should be open for anything today and expect a trading range open; however, if the market forms consecutive strong bull/bear trend bars closing above/below the opening range, traders cannot be in denial and need to enter in the direction of the breakout.
- Overall, the day will probably have a trading range open and be a limit order market for a couple of hours.
- Since there are often multiple reversals on the open, it is essential to be careful. It is easy to take a bad trade and get burned. Then you spend the day trying to make up for those few mistakes on the open.
- As I often say, most traders should consider waiting for 6-12 bars before placing a trade.
- Traders can also wait for a strong breakout with follow-through or a credible stop entry such as a double bottom/top or wedge bottom/top.
- If the day is mostly sideways, traders should pay close attention to the open of the day. Unless we get a strong trend from the open, it will likely be an important price all day. If the open is near the middle of the day’s range late in the day, traders should be open to a strong breakout up or down late in the day, creating a strong trend bar on the daily chart.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
Here are several reasonable stop entry setups from yesterday. 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 market has three consecutive bull bars, which is good for the bulls and increases the odds of a second leg up. However, the market is stalling at the moving average.
- The market has been away from the moving average many bars, so there will probably be some sellers here; however, with the past three days being bull bars and the market being in a 4-bar bull micro channel, most bears will hesitate to sell here.
- Traders will pay attention to see if today is a bear close. If it is, will it be a strong bear bar or a weaker bear bar closing above its midpoint, increasing the odds of buyers below?
- Some bulls that bought the 2017 low and the May to June trading range low were disappointed by the selloff down to the 1.0000 big round number, that they are happy to exit breakeven on the entire trade. This means some traders may look to exit their trade around breakeven at this price level (moving average).
- Some bulls knew the bulls that bought the 2017 low and trading range low (May – June) would scale in lower, so they bought where the scale in bulls would buy and are taking quick profits here.
- Also, some bulls bought the 1.0000 big round number. They will be happy to scalp out around this price level for a quick 200 – 250 pip profit.
- Overall, the three consecutive bull bars are good for the bulls, and the first reversal down will probably fail. This means the bulls will likely get a second leg up, and the bears will need a micro double top before they can get a credible sell.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day summary
- Today was a buy climax that leg that led to a reversal down and trading range for the rest of the day.
- The bulls got trend resumption up after yesterday’s strong bull trend day.
- The odds favored a trading range (lasting two hours) beginning before the end of the second hour (9:30 PT). The market met the minimum by forming a trading range before the end of the second hour.
- There was a 50% chance the bulls would get follow-through (which they got) following yesterday’s consecutive buy climaxes.
- The bulls got an upside breakout with follow-through (orange boxes around 7:40 PT). This was a strong enough breakout to make the market always in long, and the odds favor a second leg up.
- The rally up to 8:00 was a second leg, but the rally up to 8:00 was another breakout that would likely lead to a second leg up.
- It is essential to understand that traders were eager to buy all the way up to 8:00 and the reason for this is that they were confident the first reversal down would be minor, and the market would form a trading range. If one accidentally bought the high close, they could use a wide stop, scale in low, and exit back at their original entry with a profit.
- The bears formed a nested wedge higher high major trend reversal around 9:20 and got a bear micro channel that led to a strong two-bar bear breakout (orange boxes around 9:50).
- The problem the bears had with the 9:50 two-bar bear breakout was that this was big up, big down, so likely trading range. The odds favored a second leg down after the two bar bear breakout, but the second leg down may not reach a measured move down.
- The bulls were disappointed with the bad follow-through at 9:55 that some bears would exit back at the 9:50 close or a little lower. The bad follow-through at 9:55 was a reminder that the market may form a trading range soon, which happened about an hour later.
- The market continued in a trading range for the rest 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.
Trading Room
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. Al talks 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.
Charts use Pacific Time
When times are mentioned, 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.
