Emini buy signal bar for double bottom with February and wedge bottom
Updated 6:45 a.m.
Today opened below yesterday’s low and had a big bull trend bar. It is also near the bottom of a 2 day trading range. The 1st 2 bars were big enough so that bears will probably need 2 – 3 legs up to near the EMA before they will be willing to sell aggressively. Consequently, the Emini is Always In Long.
Yet, it is in a 2 day trading range. In addition, the 2nd bar was only a doji and not a strong bull trend bar. Therefore, traders will expect reversals, like yesterday.
This increases the chances that the Emini will be mostly sideways for the 1st hour until it gets closer to the EMA. At that point, the bulls will try to create a double bottom and low of the day. The bears, however, will try to get an opening reversal down from the moving average. The lack of sustained momentum up from the bottom of the 2 day range reduces the chances of a big trend day. It increases the odds of at least one leg up and one leg down today.
Pre-Open market analysis
After the Emini traded in a trading range for 5 hours yesterday, the bulls got a breakout at the end of the day. In addition, there is a big wedge bottom and a big double bottom on the daily chart. Furthermore, the monthly bull trend is strong and traders know that the odds favor a reversal up in April or May. But, yesterday was only a bull inside bar on the daily chart, and not a strong reversal.
The March bear channel on the daily chart is tight. Therefore, there is not yet a strong buy setup. Many bulls will wait to buy until they see a strong reversal up on the daily chart. When there is a reversal up from a tight channel, it is usually minor. The bulls typically need a double bottom before they can get a major reversal.
Overnight Emini Globex trading
The Emini is down 36 points in the Globex market. If it falls below yesterday’s low, the selloff will be the 3rd leg down from the March 22 bear breakout. Since yesterday had a bull body on the daily chart, it is a low probability sell signal bar. This means that there will probably be more buyers than sellers around its low. Consequently, day traders will look for a reversal up from around yesterday’s low.
Additionally, if today falls below Thursday’s low, a reversal up would form a small wedge within a big wedge on the daily chart. Traders will therefore look for a reversal up from below Thursday’s low today or tomorrow.
While the bulls are looking for a reversal up from around the February low, the bears want a strong break below that low. If they succeed, traders will conclude that the Emini will fall to the next support, which is around 2400.
Because the Emini is at important support, there is an increased chance of a big trend day up or down. Even it today is mostly sideways, the legs will likely be big enough for swing trading.
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 double bottom and double top
The EURUSD daily Forex chart is in the middle of a 3 month trading range. The past 7 days formed 2 small legs down from the March 27 high. The bears want a strong break below the March 20 low, which is the neck line of the March 8 and March 27 double top. The bulls want a double bottom with the March 20 low.
The EURUSD daily Forex chart has been in a trading range for 3 months. Consequently, there is always both a buy and sell pattern, but the probability of either is never very high. The bears have a double top and the bulls have a double bottom.
At some point, a pattern will lead to a breakout. But my 80% rule says that 80% of all breakout attempts within trading ranges fail. This is true even when a pattern looks good and a leg has strong momentum. As a result, a reversal up from the bottom of the range is more likely than a successful breakout below the bottom.
Traders will conclude that a new trend has begun after they see consecutive big trend bars that break out of the range. Until then, they will look for reversals and then 3 – 5 day moves.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart had a small bear breakout yesterday. However, it reversed back up overnight. It now has a 2 day double bottom and a 3 week double bottom.
The legs on the 5 minute chart have been bigger over the past 24 hours. Yet, they are still too small for swing trades. Day trades are still scalping for 10 to 30 pips. Until there is a strong breakout with follow-through up or down, that is their best choice.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed up from below yesterday’s low and then broke far above yesterday’s high. Today was therefore a strong outside up day.
The Emini formed a huge outside up day today. It is also creating a wedge bottom since the March 2 low. If the Emini reverses up from here, the bulls will see a higher low double bottom with the February low. If tomorrow gaps up, it would create a 9 day island bottom. Since this could be the resumption of the bull trend, traders should look for an early bull trend. If there is one, it could be another big bull day.
The bears will try to stop the rally from going above last week’s high and the weekly EMA. They want a double top bear flag.
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.
