After a strong last week’s run, bulls broke above the red declining channel on Friday, giving them the first real shot at retesting the 6900 region.
But by Monday, momentum cooled… and the market pulled back. Was that breakout for real? Let’s break it down.
Friday’s session closed above the red declining channel we’ve been watching in the Lab, which was a positive development that opened the door toward mid-November highs near 6900.
But sentiment didn’t carry over into Monday. Price turned lower intraday, challenging the breakout itself.
So, what are the scenarios?
Scenario 1: this is just a pullback to retest the broken red line, which is now acting as support. If bulls defend it and close back above it, momentum could resume and push ES.F to the nearest resistance zone around 6900.
Scenario 2: if bulls fail to hold, a deeper correction may follow. And… there’s an extra risk here: if today's session closes below the upper line of the mentioned channel, we’ll get a bearish engulfing on the daily chart. As a reminder, bearish engulfing formation = a two-candle reversal pattern, where the second candle completely swallows the first one. It often marks local tops and can trigger fresh downside momentum.
So… what does the 4H chart tell us?
The 4H structure adds weight to scenario 2 as sellers have already printed a bearish engulfing pattern on this timeframe. Even more importantly - it formed right at the 78.6% Fibonacci retracement (based on the recent move to the downside), which serves now as a double resistance zone.
Nevertheless, we should keep in mind that the current pullback remains shallow so far and price is still above the support zone near 6785–6800.
My takeaway: this is one of those setups where the daily close matters most:
- If we close above the broken red line -> bulls keep control, and a test of 6900 remains on the table.
- If we close below it -> the bearish engulfing confirms, and risk shifts toward a deeper correction (at least to around 6733).
Stay sharp and let the daily candle speak.
Anna
Trading Lab Founder