Pre-Open Market Analysis
I mentioned before yesterday's open that yesterday would probably have at least 2 hours of trading-range trade. That was because Monday’s rally was weak and therefore likely to transition into trading range price action. The entire day was a trading range day.
Yesterday closed near its low. There are now 3 legs up on the daily chart. That is a wedge bull channel. Yesterday is now a sell signal bar for today. However, it was small, the momentum up has been good, and the all-time high is a magnet above.
Yesterday is also a pause in a bull trend. It is therefore also a High 1 bull flag coming into today. Its bear body reduces the chance of a sustained rally today and tomorrow.
Since the 3-month bull channel is tight, the Emini might have to go sideways for a few days before there is a reversal down. But, as I have said several times over the past few weeks, the odds are that the Emini will test the March low and begin to trade sideways to down within a couple weeks.
This is still more likely than the rally continuing straight up to a new all-time high. But, the closer the rally gets to that high, the more likely the bulls will get a new high.
Bull Micro Channel On 60-Minute Chart
Coming into yesterday, the 60-minute chart had a 12-bar bull micro channel. This is similar to what I have been saying about the weekly chart. When there is a micro channel with many bars like this, the bulls typically buy the 1st reversal down. And they did yesterday.
Next, the odds favor a breakout above the top of the micro channel and a brief resumption of the bull trend. That was Monday’s high, and yesterday broke a little above it. Today might rally more.
Finally, the micro channel is a sign that the bulls might be exhausted. As a result, there is usually a deeper pullback after the rally gets above the top of the micro channel for a few days. Therefore, there will probably be sellers not too far above Monday’s high.
Overnight Emini Globex Trading
The Emini is up 18 points on the Globex chart. Today will therefore gap above yesterday’s high. When there is a big gap up, there is an increased chance of a trend day. A bull trend is slightly more likely.
However, a big gap up means that the 5 minute chart will be far above its 20-bar EMA. Traders do not like to pay too much above the average price. Consequently, the first 60 – 90 minutes usually enters a trading range until the EMA gets near the market.
At that point, the bulls will look to buy a wedge bull flag or a double bottom near the EMA.
A trading range always has both a bull and bear setup. The bears will look to sell a double top or a wedge rally.
Yesterday’s Setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.