Emini Might Gap Up To Form Weekly Island Bottom
Al Brooks | Jul 06, 2020 10:30AM ET
June was the 3rd consecutive bull bar on the monthly chart. But since it has a small body, it was a doji bar. That represents a loss of momentum. It lowers the probability of a strong rally in July.
On the weekly chart, last week was an outside up bar in a bull trend. It is therefore a buy signal bar for this week. Traders expect higher prices at some point this week.
On the daily chart, last week’s rally was strong. Traders expect at least a test of Thursday’s high today and probably a test of the February 24 gap soon.
The bears want a reversal down today from around Thursday’s high. There would then be a micro double top and a double top with the June 19 high. Traders would then look for a test of the June 15 low. But, the bull case is stronger.
Possible 4 month island bottom on the weekly chart
If today gaps above last week’s high, there will be a gap up on the weekly chart. Remember, there was a gap down on the weekly chart on February 24. A gap up today will create a 4 month island bottom since that February gap down.
The bulls will want a measured move up based on the 1,000 point height of the island bottom. That is unlikely, and it would probably take a couple years.
Most island tops and bottoms are minor reversal patterns. Therefore, it is more likely that the gap up will close at some point this year because that is what usually happens to gaps in trading ranges.
Overnight Emini Globex trading
The Emini is up 39 points in the Globex session. Today therefore might gap above last week’s high. This would be a gap up on the weekly chart and create a 4 month island bottom.
The bears want the gap up to fail in the 1st hour. They would like a strong selloff from the open and then a bear trend day. Today would then be a failed breakout above the June 19/July 2 double top. Traders would then expect a test of the June low. They have a 40% chance of success.
The daily, weekly, and monthly charts are bullish. It is therefore more likely that today will either be a bull trend day or at least a trading range day. Because of the possible island bottom on the weekly chart and the break above the 3 week tight trading range, there is an increased chance of a big bull trend day day.
Thursday’s setups
Here are several reasonable stop entry setups from last Thursday. 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).
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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.
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