Emini nested parabolic wedge buy climaxes at measured move target
Updated 6:48 a.m.
The Emini gapped up and had 2 big bear bars. This reduces the chances of a bull trend day. It reversed up strongly on the 3rd bar, which reduces the chances of a big bear day. There was a big gap up, then a strong reversal down, and then up. This increases the odds that today will be a trading range day.
The bulls want an opening reversal up and an early low of the day. Yet, the selling was strong and that is therefore unlikely. The bears want an outside day. Yesterday was small enough so that is possible, but a big bear day is unlikely.
Pre-Open market analysis
Yesterday rallied on the open to a parabolic wedge top. It was nested within a parabolic wedge rally on the 60 minute chart. In addition, it was around a measured move up from the 9 day trading range. That trading range will likely be the Final Bull Flag. Consequently, the Emini will probably get pulled back into that range within a couple of weeks. However, the 3 day rally has been exceptionally strong and there is no sign of a top yet.
Since the rally is exceptionally strong on the daily chart, it is probably going to be an exhaustive buy climax. That means that there will probably be a sharp 50 point reversal down within a few weeks. Then a tight trading range typically forms. The odds would favor a 2nd leg down and a 100 point pullback. Because the rally on the weekly and monthly charts is so strong, the bulls will buy the pullback.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It will therefore gap up again today. Because this 4 day rally is so unusually strong, there is an increased chance of a bear trend day. The bears will need to see consecutive big bear bars before they will be willing to hold shorts for a swing trade. The bulls will look for another early low of the day, like they got on each of the past 3 days.
It is important to note that markets rarely do the same thing too long because all of the institutions switch to similar algorithms. The result is that there will no longer be enough left taking the other side, and the pattern changes.
This increases the chance of another type of open today. For example, the bulls might have to get an early trading range instead of an immediate rally. Or, the bears might get a reversal down back into yesterday’s trading range. Yesterday’s range came 3 days into a strong bull trend and it is therefore a possible final bull flag and a magnet.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD Forex market trading strategies
The EURUSD 240 minute chart reversed down from a higher high. Since the last rally had 4 strong bull bars, this is a minor reversal. That means a pullback or trading range is more likely than a bear trend. If there is one more new high and then a reversal down, that would be a wedge top. A measured move down would test the 1.1900 area where there were many highs in the past several months. It is therefore support.
The EURUSD 240 minute Forex chart rallied strongly in December. It is now at the resistance of the September high and the bottom of a 15 year trading range. In addition, it is stalling at the high of 3 weeks ago. These factors make a pullback more likely than a continued bull trend.
Yet, the last leg up had 4 strong bull bars. While the rally is reversing down from a higher high, the momentum of that last leg up was strong. Consequently, this reversal down is probably minor. This means that there will probably be at least one more leg up.
If the chart reverses down at that point, the bears would then have a wedge top at resistance. In addition, there is a magnet below. The EURUSD Forex chart never pulled back to test the breakout point above all of the highs of the past several months. They are around 1.1900.
If there is a wedge top reversal, a measured move down based on the height of the wedge would reach that area as well. Finally, it would be about a 50% pullback from the strong December rally. It is therefore a buy zone for the bulls.
Overnight EURUSD Forex trading
The bears got a 40 pip selloff overnight. Since last week’s rally was strong and a new high is likely, the bulls will buy the selloff. Furthermore, the bear scalpers who sold above the high of 3 weeks ago will buy back their shorts. Therefore, a new high above 1.2100 is likely within a few days.
However, the daily and weekly charts are at resistance. In addition, the December rally never pulled back to test its breakout point around 1.1900. Furthermore, bear scalpers made money overnight selling above the high of 3 weeks ago. They will sell again above yesterday’s high. The bulls will probably take profits there. Since a reversal from a new high would be a wedge top on the 240 minute chart, the bears will sell for a 100 – 200 pip reversal down to support.
Since a reversal down from a new high is likely, the bulls will buy until there is a new high. The bears will sell the new high. The odds are therefore against a big move up until after a test down to 1.1900. In addition, the odds are that the EURUSD will test 1.1900 after one more new high.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The day began as a trending trading day and converted into a small pullback bull trend day.
The Emini has had a strong 4 day rally. It is a parabolic buy climax, but there is no top yet. Traders will buy the 1st small pullback next week.
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. We offer a 2 day free trial.
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.
You are right. However, I probably will not have time to fix it.
Thanks!
Thank you al for all the great work. I think Yesterday’s attached chart is for the 3rd not the 4th.