Emini double top with February 27 but tight bull channel
Updated 6:43 a.m.
The Emini tested above yesterday’s high early today. The bears want a reversal down to below yesterday’s low. Since yesterday was a small day and a trading range day, there is an increased chance of an outside down day today.
The bulls broke above last week’s high yesterday, but stalled. They will try to extend the breakout today. They want to get far above the high so that traders will see the breakout as successful.
Since yesterday was a trading range day at resistance, there is an increased chance of a trading range day today. Furthermore, there is an increased chance of a trading range open. Consequently, unless the bulls get a strong early rally far above yesterday’s high, day traders will look for an early reversal down. They know that the odds are that the trading range will continue. They also see that today’s open is a the top of that range.
At the moment, the Emini is Always In Long and breaking above yesterday’s high. If they can create several consecutive bull bars early on, they will have a decent chance of a bull trend day. If not, traders will look for an early high of the day.
Pre-Open market analysis
By trading above last week’s high, this week is now an entry bar on the weekly chart. Last week was the buy signal bar. The bulls want a big bull trend bar on the weekly chart this week. But, the weekly chart has been in a tight range for 5 weeks. That reduces the chances of a big bull breakout this week.
The Emini paused yesterday at the February 27 high. The bears still want a double top with that high and a reversal down. Since yesterday was not a big bear day, it is a lower probability sell signal bar for today. Also, the momentum up has been strong for 2 weeks.
The bulls want a strong breakout above that February 27 major lower high on the daily chart. Yet, yesterday’s hesitation makes sideways more likely than up today. Since a big bear day is also unlikely after the 2 week strong rally, today will probably be another trading range day.
Overnight Emini Globex trading
The Emini is up 9 points on the Globex chart. It is trying to break strongly above the February 27 major lower high and the 2800 Big Round Number. If they succeed, they will then try to test the all-time high.
The bears want a double top with yesterday’s high. That would create a micro double top on the daily chart. It would therefore be a higher probability sell signal for a double top with the February 27 high.
Because yesterday was a trading range day at resistance, there is an increased chance that today will be another trading range day. Since the daily chart is at resistance, there is also an increased chance of a big trend day up or down. However, a trading range is more likely. Traders need to see a strong breakout up or down before they will bet on a trend 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 trading range day likely again today
The EURUSD daily Forex chart is in the middle of a 3 month trading range. There is no reliable evidence that it is about to break out.
The EURUSD daily Forex chart has a 3 month trading range after a year long rally. The bulls hope that last week’s 2 day selloff is a pullback in a rally to the top of the range. On the other hand, the bears see last week’s rally as a pullback from a breakout below the range. Both are correct. Traders need to see sustained momentum up or down before betting on which side will win.
Legs in trading ranges usually subdivide into 2 or 3 legs. Therefore, the bulls are trying to start a 2nd leg up from Friday’s low. Yet, the 2 day rally might be all that they get. Until there are 3 – 4 average size consecutive trend days or 2 big trend days, there is not enough momentum in a leg to make additional days in the leg likely.
The weekly chart is in a bull trend. Furthermore, the chart has been sideways for 8 weeks. While it is becoming increasingly neutral, the odds continue to favor a bull breakout. A pullback usually has to grow to 20 or more bars before the bears have about the same probability as the bulls. At that point, I use the term trading range instead of pullback in a bull trend or bull flag
Overnight EURUSD Forex trading
The EURUSD 5 minute chart has rallied 100 pips up from Friday’s low. The bulls hope that it will break above the 2 day bull channel and test last week’s high.
Yet, until there is a breakout, there is no breakout. Traders will be unwilling to hold onto positions. Instead, they will continue to take quick profits. This is because they will bet that any reversal will soon fail and reverse again. Traders need a strong breakout up or down before they will swing trade.
As I am writing, the bulls are trying to get a strong breakout on the 5 minute chart. However, if there is no follow-through buying, they will take profits and the bears will bet on another failed breakout.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
By reversing down from above yesterday’s high and then breaking below yesterday’s low, today formed an outside down day.
Yesterday was a sell signal bar for a failed breakout above the February 27 high. By going outside down today, the bears triggered the sell signal. If there is a gap down tomorrow, it will create a 3 day island top.
But, yesterday triggered a buy signal on the weekly chart. When there are opposite signals on the daily and weekly charts, the market is confused. It therefore usually goes sideways until there is more information.
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.
