Emini double bottom bull flag breakout pullback test of May 22
I will update again at the end of the day.
Pre-Open market analysis
This week triggered a sell signal on the weekly chart. In addition, by trading below Wednesday’s low, yesterday was an entry bar for a Low 1 sell signal on the daily chart. However, the selloff held above Tuesday’s low. The bulls therefore hope it is a 2nd test of the May 22 high. That increases the chance of a rally above 2800 over the next few weeks.
The bears want Wednesday to be a pullback in a 5 day bear swing. Furthermore, they want to drive the Emini below the May 22 high. That is the breakout point for the June rally. If the Emini closes far below, the June breakout will have failed. That would increase the odds of a test down to the May 29 higher low.
With the Big Up and Big down of the past 3 weeks, there is Big Confusion. That usually results in a trading range. Furthermore, most of the days over the past 3 weeks have spent most of their time going sideways. That is likely again today.
Weekly support and resistance
Today is Friday and therefore weekly support and resistance are important. The bulls want the week to close at or above the open of the week. The week would then be a doji bar on the weekly chart. It would therefore be a bad sell entry bar for the bears. In addition, it would be a buy signal bar for next week.
This week is the entry bar for last week’s sell signal on the weekly chart. The bears therefore want the week to be a big bear bar. They will try to close the week on its low. At a minimum, they want a close below the open and below last week’s low. Consequently, the open of the week and last week’s low are magnets today.
Overnight Emini Globex trading
The Emini is up 14 points on the Globex chart. It is therefore back at the magnets of the open of the week and last week’s low. If today closes here, the week will be a doji bar on the weekly chart, like last week.
Markets have inertia. That means they tend to continue to do what they have been doing. Since last week was a doji, there is an increased chance of a doji this week. That means that the week will try to close near its open. At the moment, that is what is likely. There is therefore an increased chance of a trading range day today.
The bears twice this week tried to break back below the May 22 high and failed. Today will open about 20 points above that support. That makes a big bear trend day unlikely.
Because today will open near the open of the week, there is an increased chance that today’s open will be a magnet all day. Furthermore, yesterday was a big bear day. That also makes a big bull day unlikely.
Finally, most days over the past several weeks have been mostly sideways. That is a one more reason for today being mostly another trading range day.
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
EURUSD Forex double bottom leading to trading range
The EURUSD daily Forex chart reversed up twice this week after breaking below the May 29 low. This is a lower low double bottom major trend reversal.
But, only 40% of major reversals actually succeed in reversing the trend. More often, they pause the trend and the market enters a trading range. Therefore, that is what is likely here.
The bulls now have a credible bottom. However, the bears can get a new low at any time. As long as the bears do not get consecutive strong bear bars closing below the May low, the odds favor a trading range.
There are several targets for the bulls. The likely ones are the EMA and the top of the most recent sell climax. That is is the June 14 high. They also have a 40% chance of reaching the May 14 major lower high at the 1.20 Big Round Number.
Finally, and least likely, they want a 300 pip measured move up above that high. It is the neck line of the double bottom. The move would also test the March 1 low, which is the breakout point of the bear trend.
Overnight EURUSD Forex trading
The 5 minute chart rallied 70 pips overnight. It broke above yesterday’s high and triggered a 2nd entry buy signal on the daily chart. However, yesterday was an outside up bar in a 5 day tight trading range. In addition, it had a prominent tail on top. Also, it did not close above the 5 day range. These factors are not consistent with a strong reversal up.
The bulls want today to close above yesterday’s high. They therefore will buy pullbacks to below that high. Furthermore, they want today to close near its high. That is another reason for them to buy pullbacks. If today closes on its high, the week will close on its high. The weekly candlestick will then be a good buy signal bar for next week. The bulls will have a micro double bottom at the bottom of the 2018 buy climax. That is a support zone.
Since the 5 minute chart pulled back 40 pips over the past 2 hours, that is a significant loss of momentum. Therefore, the bulls will probably only scalp today as they try to keep the day near the high.
The bears always want the opposite. They therefore will sell rallies to around the high of the day. However, the 2 day rally is strong enough to make a bear trend day unlikely.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini gapped up, but formed a trading range day.
After gapping up, the Emini entered a tight trading range and remained there all day. It is deciding whether the 2 tests of the May 22 high are adequate, or if the Emini will fall back below that high. After 2 doji bars on the weekly chart, the Emini is in breakout mode for 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.
