Pre-Open market Analysis
The Emini crashed on the 5-minute chart yesterday. Consecutive big selloffs like those of Monday and Tuesday typically attract profit takers and bargain hunters. This increases the chance of a bull trend today or tomorrow. Can today crash again? While possible, a 3rd huge bear day would be very unusual.
I have been saying that February might get down to the January low and create a micro double top on the monthly chart. Yesterday fell far below the January low. Perhaps too far. There are 3 trading days left to the month. Traders have to wonder if there will be buying into the end of the month. Will February get back to near the open of the month and create a doji bar on the monthly chart instead of a big bear bar? The bulls have a 30% chance of this.
A short covering rally in a strong bear breakout typically lasts a day and a half to 3 days. That might begin today.
The selloff was surprisingly strong. Traders should expect a 2nd leg down after a bounce. The selloff might reach 3000 at the top of the 2-year trading range before the bulls will try again to make another new high. That would also be a 10% correction.
Overnight Emini Globex trading
The Emini is up 15 points in the Globex session. It sold off again last night. After falling below the 3100 Big Round Number, it reversed up. On the 60-minute and 4 hour Globex charts, there is now a parabolic wedge sell climax.Since a 3rd huge bear day would be very unusual, today and the rest of the week (and therefore month) will probably be either sideways or up. The bulls might need to stop the selling for a day before they can create a rally. Traders expect a strong short covering rally for 1 and a half to 3 days to begin this week. It might test the January low, which would retrace about half of the selloff.Because the daily range was big yesterday, the bars and legs up and down will probably be big again today. That means stops will be far and traders have to trade small size. Micro Emini is an alternative. Furthermore, scalpers will initially look for 5 – 10 point scalps and not 1 – 2 point scalps.
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. Buyers of the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day.
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.