Emini Profit Taking | Brooks Trading Course

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Market Overview: S&P 500 Emini Futures

The market has entered an Emini profit-taking and pullback phase. The bears want at least a second leg sideways to down after a pullback. The bulls hope to get at least a small retest of the prior trend extreme high (Mar 21), even if it only leads to a lower high (thereby forming a lower high major trend reversal). They hope that the 20-week EMA will act as support.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

Emini Weekly: Profit Taking PB Started, Emini profit taking

This week’s Emini candlestick was a big bear bar closing near its low and below the 20-week EMA.
Last week, we said that traders will see if the bears can create more follow-through selling. If they do, it could be the start of a two-legged pullback lasting at least a few weeks.
The bulls have a strong rally in the form of a tight bull channel.
They hope that the rally will lead to months of sideways to up trading after a pullback.
The pullback following the climactic rally is now underway.
They hope to get at least a small retest of the prior trend extreme high (Mar 21), even if it only leads to a lower high (thereby forming a lower high major trend reversal).
They hope that the 20-week EMA will act as support.
The bears got a reversal from a higher high major trend reversal and a large wedge pattern (Feb 2, July 27, and Mar 21).
They see a parabolic wedge in the third leg up since October (Dec 28, Feb 12, and Mar 21), an embedded wedge (Feb 12, Mar 8, and Mar 21) and a micro wedge top (Mar 21, Mar 28, and Apr 4). They also got a final flag reversal (ioi pattern in March).
They hope to get a TBTL (Ten Bars, Two Legs) pullback of at least 5-to-10%. They want at least a test of the 20-week EMA.
The selloff this week has retraced more than 5% and has tested the 20-week EMA.
The move down is strong enough to favor at least a small second leg sideways to down after a pullback.
The bears need to create follow-through selling following this week’s close below the 20-week EMA to increase the odds of more downside.
If the market trades higher, they want a reversal from a lower high major trend reversal.
Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar for next week.
Traders will see if the 20-week EMA will act as temporary support even if the market temporarily trades below it.
Traders should be open for the possibility of a pullback (bounce) followed by a second leg sideways to down after that in the weeks ahead.
Can the market gap down and continue to sell off to the bull trend line? The odds of this happening are lower, but traders should be open to such a situation and trade with the trend should it happen.
For now, traders will see if the bears can create more follow-through selling next week or will the market stall around (slightly below) the 20-week EMA area and form a pullback thereafter.
The odds favor at least a small second leg sideways to down after a pullback.

The Daily S&P 500 Emini chart

Emini Daily: Profit Taking PB Started, at Least 2-Legged

The market opened higher on Monday but reversed into a big bear bar. The market continued to sell off for the rest of the week.
Last week, we said that the bears need to create sustained follow-through selling trading far below the 20-day EMA to show that they are at least temporarily back in control. They got what they wanted.
The bears got a reversal from a higher high major trend reversal, a large wedge pattern (Feb 2, July 27, and Mar 21) and a parabolic wedge (Dec 28, Feb 12, and Mar 21).
They also see an embedded wedge in the current leg up (Mar 4, Mar 8, and Mar 21) and a micro wedge top (Mar 21, Mar 28, and Apr 4).
The breakout above the tight trading range (in the first half of March) was disappointing with poor follow-through buying, increasing the odds of a minor reversal from a final flag.
The profit-taking pullback has begun.
If the market trades higher, the bears want the 20-day EMA to act as resistance and want at least a small second leg sideways to down after the pullback.
The bulls got a strong rally which lasted over 5 months.
They hope that the current rally will form a spike and channel which will last for many months after a deeper pullback.
They hope to get at least a small retest of the prior high (Mar 21) even if it forms a lower high.
This week, the bears managed to get strong follow-through selling below the 20-day EMA which means the pullback phase has begun.
The selloff is strong enough for traders to expect at least a small second leg sideways to down after a pullback.
Traders will also see if there will be at least a small retest of the prior high (Mar 21). If there is and especially if it is weak (and maybe stalls around the 20-day EMA), the odds of another leg down from a lower high major trend reversal will increase.

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