Pre-Open Market Analysis
There is an FOMC announcement today at 11 a.m. PST. That often leads to a big move up or down. However, there will probably not be any surprises from the meeting.
There are now 3 clear legs up on the daily chart. This is a wedge rally. A wedge is a buy climax. It typically attracts profit-takers. Traders should expect a 2 – 3 week pullback to begin either this week or next week.
Yesterday had a bear body and is therefore a sell signal bar. But after a strong 5 week rally, the Emini might have to go sideways to up for a few days before going down. Traders expect it to begin to pull back soon.
The importance of the 20 week EMA
I have been saying that the Emini would probably have to reach the 20 week EMA before pulling back. It got there yesterday on the open and sold off. The Emini might test it 2 or 3 days before traders decide that the resistance will hold or that the rally will continue to the March 3 lower high.
Last week was only a doji bar on the weekly chart. That is a weak buy signal bar. A weak buy signal bar often has more sellers than buyers above its high.
This week triggered the buy signal by going above last week’s high. But there is now a 6 bar bull micro channel, which is extreme. It is at the resistance of the 20 week EMA and it is coming after a huge selloff.
A weak buy setup at resistance typically does not lead to a strong leg up. More often, there is a pullback that starts within a couple bars. Therefore, the Emini will probably begin to pullback soon for 2 – 3 weeks.
The selloff might retrace about half of the rally. Since the rally has been surprisingly strong, traders will look to buy the selloff. They expect at least a small 2nd leg sideways to up to test the March 3 lower high.
The Emini has been in a trading range for 2 1/2 years. It will probably remain in the range for the rest of this year.
Overnight Emini Globex trading
The Emini is up 45 points in the Globex session. It will, therefore, open with a big gap above yesterday’s close. A big gap usually leads to a trading range for the 1st hour. The bulls will look to buy a wedge bottom or double bottom near the EMA. However, the bears want a reversal down from a wedge top or double top. There is only a 20% chance of a strong trend day from the open up or down.
The 20 week EMA is at 2901 and it is significant resistance. However, the bull trend is strong and it could easily continue up to the next resistance within the next couple weeks. That is the March 3 lower high of 3125.75.
Most days over the past month have had a lot of trading range price action. Day traders will expect that again today. But, there have also been at least 1 or 2 swings up or down every day as well, Because the weekly chart is at important resistance, there is a slightly greater chance of a trend today.
However, day traders should go flat before the 11 a.m. PST FOMC announcement. This is because there is a 60% chance of at least one big reversal coming within the 1st few minutes. It is better to wait at least 10 minutes after the report before resuming day trading. Furthermore, day traders should be open to anything. That means a strong trend up or down, a big reversal, or a trading range.
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. 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.