Emini outside down day might lead to trading range
Updated 6:42 a.m.
Today opened within yesterday’s range. Since opened near the high, there is an increased chance of a breakout above yesterday’s high. Yet, the day after a big outside down day closing in the middle usually will not get far above or below yesterday’s range. The Big Down, Big Up yesterday makes a lot of trading range trading likely today.
The 1st bar was a doji and therefore a trading range bar. It further increases the odds of a trading range. Since the day is near yesterday’s high, the Emini is deciding whether to break above that high. However, since a trading range day is likely and a breakout far above yesterday’s high is not, the odds are that the Emini will form an early high of the day. Furthermore, it will probably be mostly a trading range day.
At the moment, the Emini is Always in short and back in the tight trading range of the past 2 days around 2040. The bulls want an opening reversal up. However, the big bear bar make a trading range more likely than a bull trend.
The bears want a series of bear bars. But, the Emini is at support at yesterday’s close, the moving average, and the 2840 trading range. The odds favor a trading range day.
Pre-Open market analysis
Yesterday was an outside down day, but it closed in the middle and therefore was mostly neutral. However, the buy climax on the daily chart is extreme. Yesterday is a sign that a trading range might begin soon.
There are 2 days left to the week, and the week’s range is not big. This means that the week could still close near its open. That would put a tail on top of the bar on the weekly chart. Since last week had a tail below, there is an increased chance of another doji bar this week.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. There is a measured move target at 2860 based on a breakout above a wedge top on the 60 minute chart. This is therefore resistance and a magnet above.
Today has an increased chance of being an inside day. If it breaks above yesterday’s high, it would probably stall. This is because a big reversal usually results in a trading range and not a strong bull trend. In addition, the breakout above yesterday’s high would create a 3 day expanding triangle top because yesterday was an outside day.
Yesterday’s reversal up was strong enough to reduce the odds of a big bear trend today. Since today will open near yesterday’s high, the best the bears can probably get today is a test of yesterday’s low. Even that is unlikely after yesterday’s strong reversal up.
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 daily Forex chart in strong bull breakout
The EURUSD daily Forex chart had a strong bull breakout yesterday and good follow-through buying so far today. It is at the top of a tight wedge bull channel and just below the 1.2500 Big Round Number. In addition, this is a possible consecutive complex top, where the November 27 high was the 1st attempt at a top.
The EURUSD daily Forex chart is in a strong bull trend. Yet, the bull channel has had a series of buy climaxes and therefore might form a wedge top. Furthermore, this wedge is the 2nd complex top since the November 7 low. That increases the chances of a reversal.
Because the bull channel is tight, the 1st reversal will probably be minor. That means that the best the bears can probably get over the next month is a trading range. The low of the range would probably be around the January 4 high and the 1.2000 Big Round Number.
Since the current 6 day rally has not had any pullbacks, the odds are that the bears will need at least a micro double top before the trading range will begin. Furthermore, the 1.2500 Big Round Number is just above today’s high. Because it is important symbolic resistance, the odds are that it will rally will get closer to it before the the bears can get a swing down.
Overnight EURUSD Forex trading
The EURUSD 240 minute Forex chart has been in a tight bull channel with mostly bull trend bars for 3 day. This is a strong bull trend. Consequently, the best the bears can probably get over the next few days is a trading range.
The 5 minute chart sold off 70 pips overnight, but has recovered all of that over the past 15 minutes. It might probably evolve into in a trading range today. If so, day traders will both buy and sell for scalps. When the 240 minute chart is in a tight bull channel, it is easier to make money buying.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The selloff on the open was deep enough to make a strong bull trend day unlikely. Even though the bulls got an Opening Reversal up from the 60 minute moving average, today was just another trading range day.
After yesterday’s big outside down day, today was unlikely to break far above yesterday’s high or below its low. In addition, today was probably going to mostly overlap yesterday and form a trading range day, which it did. Since it was a bear inside day, it formed an ioi sell signal for tomorrow. But, because the bull channel on the daily chart is tight, it is a minor signal.
Since tomorrow is Friday, weekly support and resistance can be important, especially at the end of the day. The two most important magnets the week’s high and midpoint. The bulls want a strong bull bar on the weekly chart. The bears want a close below the middle of the week’s range as a sign of selling pressure.
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.
