Emini weekly sell signal bar at 2700 Big Round Number resistance
I will update again at the end of the day
Pre-Open market analysis
Last week closed below its open and therefore was a reversal bar on the weekly chart. Although it had a bear body, it was not a big bear bar closing on its low. It is therefore a low probability sell signal bar for this week.
Since the Emini failed to rally strongly last week, the bulls only have a slightly better chance of still being in control. They want the rally to work up to the March high above 2800. Furthermore, they want the pullbacks to last only 1 – 3 days. Friday was the 2nd day of the current pullback.
The bears want a strong reversal down. They now have 3 consecutive bear bars on the daily chart. That is enough so that traders will probably sell the first reversal up. It is not, however, enough for traders to believe that the selloff will test the April low. Today will probably not be a 4th consecutive bear bar. But, since traders will sell rallies after 3 bear bars, today will probably be either a trading range or a small bull day.
The odds still slightly favor a continued rally up to 2800. But, the lack of consecutive big bull bars on the daily chart means that the rally will likely have several pullbacks. In addition, traders will constantly wonder if the rally will fail. Trading ranges create confusion and therefore the probabilities are never as high as traders would like. Traders hoping for a trend get disappointed repeatedly by the unending series of reversals..
Overnight Emini Globex trading
The Emini is up 5 points in the Globex session. Since today is unlikely to be a 4th consecutive bear trend day, it will probably be either a trading range day or a small bull trend day. Moreover, every day for the past 10 days spent most of the time in trading ranges. That reduces the odds of a strong trend up or down today.
Last week is a sell signal bar on the weekly chart. Therefore, there is an increased chance of a break below last week’s low. That would trigger the sell signal on the weekly chart.
Since last week was a doji bar on the weekly chart and near the bottom of a 3 month trading range, it is a low probability sell signal. Hence, there are likely more buyers than sellers below last week’s low. As a result, traders will look for a reversal up from below last week’s low.
Many bulls do not want the weekly sell signal to trigger. Therefore, there will probably be buyers just above last week’s low as well. If so, today could be an inside day.
Friday’s setups
Here are several reasonable stop entry setups from Friday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD Head and Shoulders Top Lower High
The EURUSD daily Forex chart now has a head and shoulders top lower high in its 3 month trading range. There is always a reasonable buy setup and a reasonable sell setup in a trading range. The bulls see a double bottom with either the April 6 or March 1 low. Since 80% of breakout attempts fail, these setups are much more likely to lead to reversals than to a successful breakout. Consequently, most traders are taking quick profits. This results in reversals every couple of weeks and many 2 legged moves.
Today is so far a 3rd consecutive big bear trend day. However, after 3 bear days in a trading range, the odds favor a pause today or tomorrow.
The odds still favor at least a small 2nd leg down, and then a 1 – 2 week rally. Simply look to the left to verify that the past 9 legs up and down reversed after about 2 legs and 2 weeks. Until there is a clear, strong breakout above or below the 4 month range, this pattern is likely to continue indefinitely.
Trading ranges do not last forever. This one has lasted about as long as many of the others over the past 3 years. Traders expect a breakout soon. However, they need to see consecutive big trend bars closing beyond the range. At that point, they will look for a 400 pip swing, based on the height of the trading range.
The chance of a bull breakout is slightly greater than of a bear breakout because the weekly chart is in a bull trend. But, the probability is almost 50 – 50 at this point.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off almost 70 pips over night. It has been in a 20 pip range for the past 4 hours. Since it is now testing the April 6 major higher low and has had 3 bear days in a trading range, the odds favor a 50 pip bounce today or tomorrow. Therefore, day traders will buy reversals up from below the most recent low. Furthermore, most bears will sell 30 pip rallies, but scalp, despite the 5 day selloff.
Reversals in trading ranges usually come after breaking beyond support or resistance. Therefore, this selloff will probably fall below the April 6 low of 1.2214 before reversing. That is only about 10 pips below the current low of the day.
In addition, Big Round Numbers are magnets. Hence, the selloff will probably test down to 1.22 today or tomorrow before bouncing 50 pips.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed down from a 2nd Leg Trap at the 60 minute moving average. It sold off to below last week’s low, triggering a weekly sell signal. Since last week was a weak sell signal bar, there were more buyers than sellers below. This resulted in a reversal up.
By trading below last week’s low, the Emini today triggered a weekly sell signal. However, since last week’s bar was a doji, it is a low probability sell signal. Consequently, there were more buyers that sellers below the sell signal bar. The bears need consecutive strong bear bars this week to make traders believe that the daily chart is reversing back down to the February low.
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.
