Futures Market Analysis

Russell 2000 In Consolidation?

by

The Russell 2000 futures has been range bound for the past 6 months, as shown on its continuation chart. This range between 2366.00 on the high to 2084.40 on the low looks to be in consolidation.  The interesting thing is the large volume at price cluster that's developing between 2299.00 and 2199.00.  This cluster is currently the largest dating back to its March 2020 bottom.  Once prices break outside of this range, I expect this large volume cluster to serve as an import level of either support or resistance.  Let price action dictate the breakout direction and then look to enter positions on pullbacks into the volume cluster.

If we break below 2084.40 with a nice bearish candle, then I would look to short any pullbacks into the volume cluster.  If we break above 2366.00, then I would look to go long any pullbacks into the volume cluster.

I will be watching this market closely and will provide updates when warranted.

russell 2000

Mexican Peso: Possible Bullish Breakout (revision 1)

by

There is a potential bullish ABCD pattern, which closely resembles a flag pattern, developing in the Mexican Peso. This pattern is bullish because of the retracement, which is less than 50%. Anything less than 50% is bullish.  The trigger to this pattern is a break above .05025 before going below .04919. If prices can trigger this pattern before July 20th, then we would have right-handed skewing as well. The skewing shows the momentum, which in this case would be semi-strong. Weak momentum would be skewed to the left (i.e., less bars down to the swing low, and more bars to the breakout high).  The next step is to watch how price moves towards and above the breakout level on a smaller time frame (i.e. 240 min).  So far there are 2 ABCD patterns on this time frame.  Both have deeper than 50% retracements, which signals a weak up trend.  So we have some conflicting signals between the daily and intraday time frames.  These breakout patterns work best when both time frames are in sync.  However, the daily time frame does carry more weight.  Therefore, I anticipate a breakout on the daily time frame that will stall near recent highs (0.05074 to 0.05100).  Then I expect a pullback back below the breakout area.  This could offer a nice entry because there is a volume at price cluster developing as price action has been in potential accumulation mode the past few weeks.

Set-up 1:

Buy the breakout at 0.05026, with stops at 0.04918 for a risk of 540.00/futures contract.  The target of this ABCD pattern would be 0.05174 for a reward of 740.00/futures contract.

Set-up 2:

Don't buy the breakout.  Instead, wait for a potential pullback into the volume at price cluster.  This will lower your risk and increase your reward to risk ratio.  I will give more details on this trade in a follow-up post.  The stop and target would still be the same.

Lastly, we do have some possible upside obstacles that could serve as potential scale out levels before reaching the target zone. The first is between 0.05074 and 0.05100. This zone contains the swing highs from 12-9-20, 1-21-21, and 6-9-21. The next possible scale out would be 0.05123, which is July’s monthly R1 pivot.

Stay tuned for more analysis on this potential breakout.

mpeso

New Zealand Dollar Bearish Set-up

by

The New Zealand Dollar saw a 36.70% rally from it's March 2020 low into its February 2021 high.  However, this market has lost 6.9% since and is setting up for a potential downside breakout.  The daily continuation chart shows an ABCD pattern developing off its 5/26 high.  The retracement of this pattern is less than 50%, which is bearish.  A move below 0.6921 triggers the pattern.  If the pattern triggers tomorrow, then it will be 11:3 right-handed skewing.  Right-handed skewing signals strong momentum, while left-handed skewing signals weak momentum.  That's what makes this pattern so interesting; the combination of bearish retracement and potentially explosive momentum.  The pattern, once triggered, would be void above 0.7104.  The downside target would be 0.6708.

Momentum traders, who would take the breakout trade, would be risking 1850.00 per futures contract.  The reward would be 2120.00 per futures contract.  Pullback traders would look to get long somewhere inside the 0.6921 and 0.7104 area for a better reward-to-risk ratio.

Downside obstacles? The 120m chart shows a tiny abcd pattern on the leg down from the 7/6 high.  It has potential Fib support extensions at 0.6869, 0.6796, and 0.6723.  There's also a July monthly S1 pivot at 0.6840.  Finally, there's a July monthly S2 pivot just below the target at 0.6697.

Chart_21-07-08_16-03-55

One last thing worth mentioning is the bigger picture of this market, which is bullish.  A pullback down to the bearish ABCD pattern's objective would only represent a 38.20 retracement of the 2020 to 2021 rally.  Also, if we look at volume profile over the same time we see a larger volume cluster between 0.6683 and 0.6521.  This could present a potential BUYING opportunity.

To sum up:

Look for a break below 0.6921 within the next few days for a bearish breakout with strong downside momentum.  Play either the breakout OR wait for a possible pullback for a better entry.  The downside target is 0.6708, which is just above a larger volume cluster of support.  A potential long trade could present itself at that time.

Stay tuned!

 

Chart_21-07-08_16-05-58

Mexican Peso: Possible Bullish Breakout

by

There is a potential bullish ABCD pattern, which closely resembles a flag pattern, developing in the Mexican Peso. This pattern is bullish because of the retracement, which is less than 38.20%. Anything less than 50% is bullish, while anything less than 38.20% is very bullish. The trigger to this pattern is a break above .05025 before going below .04936. If prices can trigger this pattern on Tuesday, then we would have 4 bars down and 2 bars up. This would be 2:1 right-handed skewing. The skewing shows the momentum, which in this case would be strong. Weak momentum would be skewed to the left (i.e., less bars down to the swing low, and more bars to the breakout high). That is what makes this potential pattern so promising. It combines very bullish retracement with potentially strong upside momentum. The target of this ABCD pattern would be between 0.05169 and 0.05191. This pattern fails below 0.04936.

However, we do have some possible scale out levels before reaching the target zone. The first is between 0.05704 and 0.05100. This zone contains the swing highs from 12-9-20, 1-21-21, and 6-9-21. The next possible scale out would be 0.05123, which is July’s monthly R1 pivot. However, based on the 60-minute chart, I would not be surprised to see some even earlier resistance around 0.05039. This level could cause a small pullback and create a nice buying opportunity.

Stay tuned for more analysis on this potential breakout.

 

peso

Nasdaq Long Trade Nears Resistance

by

In my last post, I wrote about the Nasdaq futures contract approaching a strong volume profile support zone between 13,047.00 and 12,635.50. I also mentioned getting long at 12,933.50, 12,878.50, and 12,850.75. The 12,933.50 level was reached, and a long trade initiated. Now we move towards managing the trade. If we were able to enter with multiple contracts, then I would advise scaling out of some inside an approaching resistance zone between 13,272.00 and 13,380.75. This zone has May’s monthly S1 pivot, the 100 DMA, the 50 DMA, the 34 EMA (low), and a Fib symmetry/retracement cluster acting as possible resistance. In addition to these, we also have a change of polarity (old support becomes new resistance) at 13,287.25, 13,353.75, and 13,380.75. I expect prices to stall inside this zone. The key question will be can prices break through and rally higher OR will this be the area prices stall and retest the recent lows. If you have multiple contracts, then scale out here. If you only have one, then you have a choice to make. I would also consider moving stops to below the recent low at 12,915.00. More updates to come.