Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

S&P 500 E-Mini: Buyers Lurk below April 26 Low

Published 05/05/2023, 09:34 AM

Emini daily chart

  • The Emini gapped down yesterday and broke below the April 26th low. However, there were buyers below its low, and yesterday’s bar closed with a tail, above the April 26th low.
  • Just as there were sellers above the April 28th high, there are probably buyers below the April 26th low, and as expected, the overnight Globex market has rallied 40 points from the April 26th low.
  • The odds are that the Bears will get a second leg down after the past three consecutive bear bars. However, the market is forming a large expanding triangle (see Encyclopedia chart below). Expanding triangles are a form of breakout mode and increase the odds of more sideways trading. This means that the pullback will probably be deeper than what the bears want.
  • Traders have to be prepared for a successful double bottom with the April 26th low. If today is a strong bull reversal bar, and next week forms 2-3 strong bull bars, the market could break above the May 1st high and get above the February high.
  • The bears have still failed to close the May 22nd breakout point high. They have tested it twice, but the bears need to do more to convince traders that the possible measuring gap from the March 13th low to the March 22nd high, projecting up to 4,300, will fail.
  • There are trapped bulls who bought the pullback of the May 1st low, and they likely scaled in lower. These bulls will be disappointed enough to sell the first reversal up. This means sellers are probably around the 4,135 price level, around a 50% pullback of the recent selloff.
  • Overall, traders should expect the bears to become disappointed over the next few days, just like the bulls were disappointed by the breakout above the April 18th high.
3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Emini 5-minute chart and what to expect today

  • Emini is up 38 points in the overnight Globex session.
  • The overnight Globex session broke below the April 26th low and rallied over 40 points.
  • Traders should expect today to disappoint the bears since the daily chart is in a trading range.
  • Trading ranges often have strong sell vacuums to support, such as the April 26th low, fail, and reverse.
  • As I often say, traders should assume that the market will have a lot of trading range price action on the open and go sideways for 6-12 bars. This means most traders should wait for 6-12 bars unless comfortable with wide stops and limit order trading.
  • Most traders should try and catch the opening swing that will often begin before the end of the second hour. There is typically a 40% chance that the opening swing will double the range of the day when it happens.
  • Since there is greater than an 80% chance of an opening swing, this provides a great risk/reward for traders.
  • Lastly, the opening swing often forms after a double top/bottom or a wedge top/bottom. So a trader should look for one of these patterns. See the chart of the four common outcomes on the open for examples. Notes, this is a slide from the Encyclopedia of Chart Patterns that is available for purchase for members that have owned the course for more than 60 days.
  • Overall, traders should pay close attention to the open of the day as the odds favor a lot of trading range trading today.
  • Because the Globex market broke below the April 26th low and reversed, traders should be open to a possible bull trend day, which would disappoint the bears on the daily chart, reminding traders that the market is in a trading range.
  • Today is Friday, so weekly support and resistance are essential. Traders should be open to the possibility of a strong breakout up or down late in the day as traders decide on the close of the weekly chart.
3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Yesterday’s Emini setups

SP500-Emini-5-Min Chart

Because I often get questions about what charts Encyclopedia members see, today I am including a sample general information slide from the Encyclopedia below.

Big Gap Up - 4 Common Outcomes

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 near 4-year library of more detailed explanations of swing trade setups (see Online Course/BTC Daily Setups). Encyclopedia members get current daily charts added to Encyclopedia.

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 Emini.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.