Pre-Open market analysis
The Emini gapped up Monday on the weekly chart and rallied. Yesterday it was in a trading range for the first 3 hours and then in a Small Pullback Bull Trend. It was follow-through buying after Monday’s gap up on the weekly chart.
The monthly candlestick closes on Monday. There is often some profit taking just before any strong trend bar closes. Consequently, there is an increased chance of a 1 – 2 day pullback within the next few days.
But traders expect higher prices because the daily chart is in a Small Pullback Bull Trend. Traders will be eager to buy the first 1 – 2 day pullback.
If there is a gap down soon, it will create an island top with Monday’s gap up. However, an island top is a minor reversal pattern, especially in a strong bull trend.
Overnight Emini Globex trading
The Emini is unchanged in the Globex session. Since yesterday was a buy climax, traders expect at least a couple hours of sideways to down trading to begin by the end of the second hour. But there is a 50% chance of some Emini follow-through buying in the first 2 hours.
Can today be another strong bull day? Of course, especially since the daily chart is in a Small Pullback Bull Trend. Traders will continue to buy one day pullbacks and intraday selloffs. However, most recent days have had a lot of sideways trading. Day traders will expect more again today.
It is important to note that while the bull trend on the daily is very strong, it is also extreme. And, remember, there was a streak of 9 consecutive bull days that ended 2 weeks ago. That increases the chance of a surprisingly big, brief profit-taking selloff coming within the next couple weeks.
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. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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.