Pre-Open market analysis
The Emini reversed down last week from a nested wedge top on the daily chart. This is probably the start of a 2 – 3 week pullback to around 2600. Since the 6 week bull trend has been strong, the selloff will likely be weak. That means traders should expect bounces along the way.
On the weekly chart, last week was a reversal bar. The Emini went above the 20 week EMA and reversed down, as I said it was likely to do. Last week is therefore a sell signal bar for this week.
Since it reversed down from the EMA and the weekly chart was in a buy climax, this week will probably fall below last week’s low. Since The Emini is down 80 points in the Globex session, it will probably gap below last week’s low. That would trigger the sell signal. But after 6 weeks without a pullback, traders will look to buy a 2 – 3 week pullback.
Overnight Emini Globex trading
The Emini is down 80 points in the Globex session. It will probably open with a big gap down, which would trigger the weekly sell signal. Traders believe that a 2 – 3 week pullback is underway.
They are probably correct, but the selloff is a pullback in a 6 week bull trend. It is therefore unlikely to go down very fast. Day traders expect some strong bull trend days along the way.
When there is a big gap down, the Emini is far below the EMA on the 5 minute chart. Day traders do not want to sell too far below the average price. That limits the number of sellers on the open. The big gap down limits the number of buyers.
This results in confusion. Day traders expect that a double top or bottom or a wedge top or bottom will be necessary before there is clarity. There is only a 20% chance of a relentless trend day from the open.
The first few bars will tell traders if today will have a trading range open. If there is one, they will expect a 2 – 3 hour trend to follow. But, because a trading range open represents balance, a trend coming from it usually does not continue for the rest of the day.
Friday’s Setups
Here are several reasonable stop entry setups from Friday. 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 (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.