Posted 7:15 a.m.
The Emini opened just above yesterday’s low, but the reversal up was weak. Since it was within yesterday’s trading range and the signal bar and reversal were weak, the odds of an early trading range are high, and as they are for a lot of trading range price action today.
The Emini broke to the upside on the 7 a.m. report and the breakout was strong enough for traders to expect some follow-through, but not strong enough for traders to expect a strong bull trend day.
At the moment, the Emini is Always In long, but still within yesterday’s trading range and the breakout will probably end up as a bull leg in a trading range rather than the start of a strong bull trend. There will probably be an early pullback, which probably will be bought, but the rally is disappointing and more likely to not lead to a strong trend. However, if the bulls are able to get more consecutive bull trend bars, they could create a strong bull trend day.
Less likely, this rally will quickly fail and create a lower high major trend reversal. Traders need to be ready for this possibility because the Emini is at important resistance…the all-time high and the all-time highest close.
My thoughts before the open: Futures trading strategies for a failed breakout
The Emini sold off at the end of the day and for several hours afterwards, but has been in a tight trading range since then. Because yesterday was an entry bar for the failed breakout to a new all-time high, and the Emini then reversed up to above the signal bar high (Tuesday’s high), and then reversed back down to near the low, it created a micro double top for its candlestick pattern. If today trades below yesterday’s low, and it probably will and it might even gap below, it would be a 2nd entry sell signal on the daily chart, and the price action trading strategy is to be ready for a bear breakout, or a reversal up.
Whenever the Emini is reversing down from above a prior high, traders learning how to trade the markets should realize that the best day trading strategy is to be prepared for a swing trade down and a possible bear trend day. This is the 5th consecutive week when the Emini has broken above the top of the weekly tight trading range, but without a big bull trend bar. This is an amazingly weak breakout. Unless the bulls are able to create a big bull trend bar soon on the weekly chart, the bulls will begin to sell out of their longs and the bears will begin to get confident that the breakout will fail. This could lead to a quick reversal down.
If the Emini sells off into the close of the week (Friday’s close), it could create a strong sell signal bar on the weekly chart. This would obviously be good for the bears, and they will try hard to make it happen, although they sometimes do not do it until just before the bar closes (the final hour of the week). This candlestick pattern would then be a failed breakout of a tight trading range on the weekly chart, which would be a Final Flag reversal.
The selloff might have begun yesterday, and the day trading tip for online daytraders today is to be ready for possible follow-though selling. If the bears are taking control (there is no strong evidence yet, even though the context is good), the Emini might have bear trend days today and tomorrow, which would make swing trading shorts the best price action trading strategy.
Alternatively, the tight trading range price action of the past 4 months could continue, and today and tomorrow could remain ordinary trading range days. If so, traders will be more inclined to scalp, buying low, and selling high. There is still the possibility of a strong bull breakout, but this is become less likely as more days go by with the bulls continuing to fail.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini failed to trigger a sell signal by going below yesterday’s low and instead rallied to close at a new all-time highest close.
Tomorrow is Friday and the bears needed today to be a bear trend day if they hoped to get a bear reversal bar for the candlestick pattern on the weekly chart. Instead, daytraders had a swing trade up from just above yesterday’s low and traders learning how to trade the markets then saw a new all-time highest close.
This sets up an interesting situation for tomorrow. Because the bears would need about a 40 point selloff tomorrow to create a strong bear reversal bar, they needed part of that selling to come today and they did not get it. This makes a weekly bear reversal bar now a low probability candlestick pattern when the bar closes tomorrow. It also creates the prospect of this week becoming a big bull trend bar, which would be a strong breakout on the weekly chart. Since the bears failed to create a bear trend day tomorrow, traders learning how to trade the markets need to be ready for a possible bull trend day tomorrow. This would create a strong bull breakout bar on the weekly chart and it could lead to a test of the top of the weekly channel. Is it likely to happen tomorrow? No, but there might be a 40% chance of a strong bull trend day, and online daytraders need to be ready to swing trade at least part of their positions.
Did the absence of a bear breakout below yesterday’s low destroy the bear chances tomorrow? No, but the odds of a bear trend day are now much less. If the bears succeed in getting a bear breakout, traders need to be ready to swing trade short positions and not be in denial. However, if tomorrow will be a trend day, a bull trend now is much more likely than a bear trend because of what happened today.
Best Forex trading strategies
Those trading Forex for a living should notice that he Pound was strong in Europe, especially the GBPCAD, but GBPUSD is strong and EURGBP is weak (the Pound is strong). Forex trading for beginners will be to look to buy pullbacks for possible Forex swing trades and for Forex scalping.
The EURUSD sold off from a 60 minute wedge top to the bottom of the wedge, which is support. Since the bull channel is now converting to a trading range, traders will be scalping more over the next couple of days. Although the selloff has been strong, the EURUSD is at the prior low and will probably try to base for a bounce back to the middle of the 60 minute trading range.
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.
Al, firstly thanks for your comments on that other thread about how much a good trader can expect to make, I found that inspiring! I trade the Euro and have taken 50-60 pips (about half the daily range) out of the market from time to time, but never knew if I was being too greedy/conservative before. Now I feel like I have something to shoot for!
I trade the m15 chart as I find it simplifies the PA and makes it easier to catch those 1-3 best trades a day. Any advice with regards to trading the m15 over the m5? Differences/nuances? Apart from the smaller position sizes that is. I realise my question is a bit ambiguous but I’m just trying to learn all I can! I use an AI approach to trade management to keep it simple.
Thanks again for your time!
I think that a lot of traders find the 15 min easier than the 5 min because it gives them more time to think. However, I trade it exactly the same as the 5 min, other than trading smaller because the stop is usually further away.