Tight trading range for 5 days increases chance of more sideways trading despite E-mini rally into Labor Day.
Friday traded below Thursday’s low and was the first pullback in 6 days.
The reversal down was from the August high and the measured move based on the height of the pandemic crash.
Friday was a bull bar and therefore a High 1 buy signal bar for today.
But it had a prominent tail on top and the E-mini has been in a tight trading range for 5 days. This is a weak buy setup.
Traders expect higher prices for at least another week.
September will probably be the high of the year and it should have a bear body on the monthly chart.
The E-mini might be mostly sideway ahead of the Sept. 22 FOMC announcement before the 2-month reversal begins. There might be a blow-off top to this 18-month rally.
E-mini 5-minute chart and what to expect today
E-mini is down 2 points in the overnight Globex session.
After 5 days in a tight trading range, there is an increased chance of another relatively small sideways day today.
This is a Breakout Mode pattern in a buy climax. A big trend day in either direction can come at any time, but markets have inertia. They continue to do what they have been doing.
If there is a series of strong trend bars up or down, the odds of a big trend day will go up.
Here are several reasonable stop entry setups from last Friday (before Monday’s holiday). 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 E-mini.