Emini daily chart- The Emini has formed a seven-bar bull microchannel. This is a strong enough breakout for traders to expect a 2nd leg up and the market to get above the October 17th high. However, as strong as the breakout is, the market is still within a trading range. This means a pullback is likely.
- The market is still within a larger trading range; therefore, the pullback of the rally from the October 27th low to yesterday’s high could reach a 50% pullback (4,257).
- Some bears sold the third leg down to the October 27th low and got trapped on the reversal up. While some bears got out and took the loss on the way up, other bears scaled in higher and they will likely look to get out on any pullback.
- The bulls know that the bears are trapped and will use any pullback to add to their positions.
- Trading ranges are often forgiving to traders who scale in. This means the market may pull back to the 50% price level mentioned above to allow the bears to exit near breakeven or with a small loss.
- The bulls want to prevent a deep pullback and continue the rally higher. This will squeeze the scale in bears and force them to buy back shorts, adding to the buying pressure. There would also be trapped bulls who missed getting long hoping to be able to enter on a pullback. Those bulls will also get long, adding to the buying pressure.
- Overall, traders will expect a pullback soon lasting 1-3 days.
Emini 5-minute chart and what to expect today
- Emini is up 2 points in the overnight Globex session.
- The Globex market recently tested yesterday’s low during the early morning hours. The bulls want the market to form a double bottom and rally above the November 4th high.
- If the market reaches the November 4th high, there will probably be sellers not far above, and the trading range price action will continue.
- The bulls want a strong upside breakout today and a close above the November 4th high.
- As always, traders should expect trading range price action on the open and consider not trading for the first 6-12 bars on the open.
Yesterday’s Emini setups
Here are reasonable stop entry setups from yesterday. I show each buy entry bar with a green arrow and each sell entry bar with a red arrow. 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.