Pre-Open market analysis of daily chart
o Wednesday was big bear day that closed far below bottom of four-week trading range. A three-day collapse.
o The weekly chart has big bear bar, and the Globex weekly chart has OO pattern (consecutive outside bars, so breakout mode).
o Yesterday’s low was above Wednesday’s low, and its high was below Wednesday high. It was, therefore, an inside day.
o The high was at the resistance of last week’s low, and the bottom of the four-week trading range.
o Yesterday closed just above its midpoint, and it is, therefore, a weak buy signal bar for today, for a High 1 pullback in the year-long bull trend.
o The three-day selloff from above the four-week trading range to below its low, was surprisingly strong. A Bear Surprise typically has at least a small 2nd leg sideways to down.
o Traders, therefore, expect a test down within a few days.
o There is a 50% chance that a 10% correction has begun. I will write about this in my weekend blog.
o What happens over the next several days will make the probability either favor the bulls, or the bears for at least a couple weeks.
o Today is Friday, so weekly support and resistance are important.
o Bulls want the week to close above last week’s low, above bottom of four-week trading range, and above the mid-point of the week. If they succeed, next week will probably be sideways to up.
o The more the week closes below that resistance, and near its low, the more traders will expect lower prices next week.
Overnight Emini Globex Trading On 5-Minute Chart
o Up 25 points in the Globex session, so might gap above yesterday’s high.
o A gap up would create a three-day island bottom, but island tops and bottoms are usually minor reversal patterns.
o Small gaps typically close in 1st hour, and are then not important.
o Increased chance of big bull trend day today, because bulls want to retake control and resume the yearlong bull trend.
o If today is bull trend, bulls want close to be in or above the big gap above Tuesday’s high.
o If there is an early rally, the bears will try to get a midday reversal down. They want today to be a sell signal bar on the daily chart, which they hope is beginning a Small Pullback Bear Trend.
o Most days have a lot of trading range price action, but if there is a series of strong trend bars in the 1st hour in either direction, there would be an increased chance of a strong trend day.
o Since today is Friday, there is an increased chance of a strong move in the final hour.
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 view. 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.