Pre-Open market analysis
Yesterday broke above last week’s high, which triggered a weekly buy signal. But the setup was weak because last week was a bear bar after an outside down bar.
Furthermore, the Emini reversed down from the top of a 3 year expanding triangle top 2 weeks ago. Finally, there were streaks of 7 and 9 consecutive bull bars in August and traders expect a pullback to below the low of both.
Yesterday was an outside down day. There is now a small double top with last Thursdays high. The bears are hoping that this will lead to a break below the September low and then a move down to 3000 – 3200.
I have mentioned a few times that September might trade below the August low after reversing down from above the August high. It would then be an outside down month on the monthly chart. That would increase the chance of lower prices in October.
Because the Emini is still in the 2 week trading range, it still might work its way up to 3450 – 3500. Whether or not it does, traders expect the reversal down from 2 weeks ago to continue down to 3000 – 3200 before there is a new high.
Overnight Emini Globex trading
The Emini is down 58 points in the Globex session. Today will open with a big gap down.
When there is a big gap down, the Emini is far below the 20 bar EMA. Day traders will only sell far below the average price if the early bars are far above average in terms of their bearishness. They want to see 2 or more consecutive bear bars closing on their lows.
The bulls want the opposite. They want to see a couple consecutive big bull bars closing near their highs. If they get that, then they hope that today will trend up.
Most of the time, a big gap down leads to confusion. Has the gap already fully priced in the bearish news? This typically results in a trading range for the 1st hour or two. The bulls will look to buy a double bottom or wedge bottom for a swing up. The bears want to sell closer to the average price. They look for a wedge bear flag or a double top near the 20 bar EMA.
If there is a trading range open, it is a sign of balance between the bulls and bears. It reduces the chance that a breakout from the range will lead to a trend that lasts for the rest of the day. More often, there is some more trading range price action later in the day.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
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.
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.