- The Emini is getting near the October 17 high and will probably reach it soon. The market may pull back first before the bulls are able to reach the October 17th high.
- Monday was a doji in a buy-the-close rally. Dojis are one-bar trading ranges, meaning Monday’s range will be a target, and the market will probably pull back in a day or two and test its high.
- Bears are hopeful that Monday’s high is a final flag that will cause yesterday’s breakout above it to fail.
- The Bulls have done an excellent job with the rally from the October 27th high. However, it is still below the October high. This means the October selloff and recent rally is a two-bar reversal on a higher time frame. This increases the risk of a deep pullback, possibly to the 50% level from the October 27th low to yesterday’s high.
- There are trapped bears who sold the rally above October 27th. They are trapped if they scaled in higher and are trapped in a bad short. Those bears will probably use a pullback to buy back shorts at a lower price, reducing their loss. The bulls know this, and they will look to buy any pullback.
- The risk traders face is getting trapped out of a breakout if the market continues to rally without a deep pullback. This would force traders to chase the market up, adding to the buying pressure.
- Overall, the odds favor a pullback that lasts at least 1-3 bars. However, traders should expect the first reversal down to fail.
- Emini is up 6 points in the overnight Globex session. The Globex market has been in a tight trading range for most of the overnight session.
- Today will probably have a lot of trading range price action today as the market transitions into a trading range on higher time frames, such as the 60-minute chart.
- Today will probably close below the day’s open and end the streak of consecutive bull bars on the daily chart. This means that traders should pay attention to the open of the day as it will probably be a magnet, especially if today has a lot of trading range price action.
- o Traders will look to sell rallies, especially if the market is above the day’s open.
- o As I often say, most traders should consider not trading for the first 6-12 bars unless they can make quick decisions. The open usually has a lot of sideways trading, which is not ideal for traders starting out due to the requirement of limit order trading on the open.
- o Most traders should try and catch the opening swing that often begins before the end of the second hour after the formation of a double top/bottom or a wedge top/bottom.
Emini 5-minute chart and what to expect today
Yesterday’s Emini setups
Here are reasonable stop entry setups from yesterday. I show each buy entry bar with a green arrow and each sell entry bar with a red arrow. 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.