Yesterday gapped up to a new all-time high on the daily, weekly, monthly, and yearly charts. However, the E-mini immediately sold off and formed a big bear trend—a failed gap up.
Yesterday traded above Thursday’s high and then below its low. Yesterday was therefore an outside down day. In fact, this week is already an outside down week. Since Thursday was an outside up day, there are consecutive outside bars on the daily chart. This is an OO (outside-outside) setup, which is a Breakout mode pattern. Yesterday is both a buy and sell signal bar. If the E-mini trades below yesterday’s low within the next few days, it would trigger the sell signal. However, yesterday had a big tail below. That creates uncertainty and increases the chance that today will be sideways.
Since there is a Spike and Channel Bull Trend on the daily chart, traders expect a test of the start of the bear channel. That is the Nov. 10 low just below 3500. Yesterday might have been the start of a move down to 3500. The bears need a break below yesterday’s low to trigger the sell signal. They also need bear bars closing near their lows.
If the OO buy signal triggers this week, it would be coming late in a bull trend. The OO would probably be a Final Bull Flag, which means the rally would likely not go far before the E-mini reversed down.
Overnight E-mini Globex trading
The E-mini is down 12 points in the Globex session. While the selling was strong yesterday, the E-mini actually rallied for the entire 2nd half of the day, and it was basically in a trading range for 5 hours. Today is going to open within that range.
I have been saying for several weeks that the E-mini might wait for the results of the Georgia senate races before making its next move. Those results might not be available until the end of the week.
Yesterday’s exhaustive sell climax led to a trading range. There is an increased chance of the E-mini continuing yesterday’s trading range and staying within yesterday’s range today. Also, the big tail on the bottom of yesterday’s candlestick on the daily chart means that there might be buyers below yesterday’s low. That is true even though a break below yesterday’s low would trigger a sell signal on the daily chart.
Today will open around yesterday’s close and within yesterday’s trading range. Also, the E-mini is in the middle of a 6-week trading range. Finally, there is uncertainty regarding the Georgia election. These factors increase the chance of more trading range trading. However, with yesterday’s range as big as it was, there will probably be swing trades up and down today, even if it is a trading range day.
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. 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.
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.