– Yesterday reversed up strongly from a breakout below the January OO sell signal bar on the monthly chart.
– That low was also the bottom of a seven-month trading range.
– Yesterday was a big bull bar closing near its high. It is, therefore, a strong buy signal bar on the daily chart. The bulls are hoping that yesterday will be the end of the two-month correction. If it is not, the reversal up was so strong that a new low will probably not be much lower.
– If there is one more leg down, a reversal up would be a wedge bottom, where the first two legs were Jan. 24 and yesterday. That would probably be the final low, although there is often test of a wedge bottom that goes slightly below the wedge.
– The bulls currently see the two-month selloff as a wedge bull flag with the Dec. 3 and Jan. 24 lows.
– I have been saying that the Emini would break below the January low, which would trigger the OO sell signal on the monthly chart. Yesterday triggered the sell signal.
– However, I also said that the bull trend was strong enough on the monthly chart for the reversal to be minor, which means that it would last two to three months.
– February is the second month, and yesterday is a reasonable candidate for the end of the correction.
– There are two important things that we do not yet know.
– The first is whether yesterday will be the final low. Or, if there will be a bounce and one more leg down.
– The second is once the selloff ends, will the bull trend resume or will the Emini go sideways for many months and possibly all year.
– We need more information, and more information means more bars.
– If the bulls can create several consecutive bull bars on the daily chart closing near their highs, the odds will favor a resumption of the bull trend.
– Today’s strong reversal up after the Jan. 24 strong reversal up means there is good buying pressure. That makes much lower prices unlikely, but there is still a 50% chance that there will be one more leg down after a bounce.
– The next targets below are the 4,000 level, a 20% correction (3,846 based on the March contract, which would mean a bear market), and the gap above the March 2021 high of 3,858.25.
– There is only a 30% chance that the selloff will continue down for a measured move to around the pre-pandemic high (February 2020 high of 3318), which would be a 31% correction.
Emini 5-Minute Chart And What To Expect Today
– Emini is up 25 points in the overnight Globex session.
– Since yesterday was a buy climax day, there is a 75% chance of at least a couple hours of sideways to down trading that starts by the end of the second hour today.
– Yesterday is a buy signal bar on the daily chart, and the context is good for the bulls. Today will probably trigger the buy signal by going above yesterday’s high.
– If today gaps up, the gap might be relatively small. If so, small gaps typically close early in the day.
– Since the context on the daily chart is good for a reversal up, there is an increased chance of a bull trend day today.
– However, yesterday was a huge day. That means the stop for the bulls is far below. That increased risk will reduce the number of bulls who will buy above yesterday’s high. Many will prefer to buy a pullback, which would have less risk. That increases the chance of a few sideways days, like after the Jan. 24 big buy signal bar.
– Today is the last day of the week, so weekly support and resistance can be important, especially in the final hour.
– The bulls want this week to be a good buy signal bar on the weekly chart for a High 2 bull flag with the Jan. 24 low. They, therefore, want the week to close far above the open of the week. If they succeed, that will increase the chance of higher prices next week.
– It is unlikely that the bears will get the week to close near its low. At a minimum, they want the week to close below the midpoint of the week. That would increase the chance of sideways to down trading next week.
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 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. 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.