Emini daily chart
o The Emini gapped up yesterday and closed near its high. Bulls chance for strong breakout above the March 22nd tight trading range.
o Next, the bulls want strong follow-through today, increasing the odds of a measured move and a test of the February high.
o The bears see the March 13th to March 22nd rally as a bear flag. They do not mind if the market goes above March 22nd as long as the breakout fails quickly and reverses down.
o The bulls have a chance to get a measured move up of the March 13th to March 22nd range, which would project up to around 4,300.
o Ultimately, the bulls hope the rally that began in March is a double bottom, higher low major trend reversal. It is important to remember that major trend reversals typically lead to trading range price action. This means that most major trend reversals do not lead to strong breakouts and are typically legs in a trading range.
o The bulls want the early formation of a small pullback bull trend. While the rally up from March is not yet a clear small pullback bull trend, the market could rally far if the bulls start forming subtle or negative gaps.
o Small pullback trends begin as legs in trading ranges, like the one here (beginning of March). The rally looks weak, so bears start to scale into shorts; however, instead of a downside breakout, the market continues higher. This squeezes the bears out of shorts adding to the buying pressure. The Bulls would also be trapped out of a longs, and once they detect the small pullback behavior, they will buy any pullback, even if it is a bar or two.
o Overall, today is essential to see if the bulls can get a follow-through bar closing on its high or at least above its midpoint. The bears want to prevent this and form a strong bear bar.
Emini 5-minute chart and what to expect today
o Emini is up 24 points in the overnight Globex session.
o On the 60-minute Globex chart, the bulls still have a tight bull channel that began during the March 28 overnight hours.
o The rally is currently a small pullback bull trend on the 60-minute chart. The bears need to make the market go sideways for several bars, or else the odds of higher prices will continue.
o As I often say, traders should consider not trading the first 6-12 bars unless they are comfortable trading with limit orders.
o Most traders should wait for a credible swing trade on the open.
o There is typically a greater than n 80% chance that a swing trade will begin on the open before the end of the second hour. The opening swing trade will often begin after the formation of a double top/bottom, or a wedge top/bottom. Traders should see if the market is forming one of these patterns, as it can lead to a credible stop-entry swing trade lasting at least 10 bars and two legs.
o Traders should also remember that there is typically a 50% chance that the initial move on the open will fail and reverse. There is also an 80% chance that the initial move on the open will get a minor pullback. This means there is really to enter on the open.
o Overall, the critical thing on the open is to be patient, and if one is confused about what the market is doing, just step aside.
Yesterday’s Emini 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. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a near 4-year library of more detailed explanations of swing trade setups (see Online Course/BTC Daily Setups). Encyclopedia members get current daily charts added to Encyclopedia.
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. These therefore are swing entries.
It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.