Pre-Open Market Analysis
Yesterday gapped down and formed a 2-day island top on the daily chart. It closed on its low and therefore erased much of last week’s island bottom and rally.
The bulls need a rally today to create a strong buy signal bar. If the bears instead get another bear day, traders will see last week’s rally as simply a pullback from last week’s selloff.
It is important to pay attention to context. On the daily chart, look to the left. The Emini is now in the August trading range where there were many big legs up and down. The past 2 weeks are duplicating this price action. Traders see the Emini as again in Breakout Mode.
Overnight Emini Globex Trading
The Emini is up 26 points in the Globex session. It will therefore gap far above yesterday’s close and erase much of yesterday’s late selloff.Since the odds favor a 2nd leg up on the daily chart, there is an increased chance of a bull trend day today. Also, a big gap up today would reduce the chance of a big bear day, which the bears need to regain control.The Emini has had several big moves up and down over the past week. That is trading range price action. It increases the chance of reversals on the 5 minute chart. Monday and yesterday had rallies that reversed down, and yesterday had an early selloff that reversed up. Day traders will be ready for more reversals again today.However, the legs up and down have been big enough for swing trading on the 5 minute chart, and the odds still favor a test of Monday’s high within a few days.
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.