Breakout

ES has Broken Out Downwards from Today's Triangle, the H&S, and the Potential Price Channel

ES has Broken Out Downwards from Today’s Triangle, the H&S, and Its Potential Price Channel

ES has broken out downwards from the little triangle it formed most of today, the little H&S on its chart, and its potential (now killed) price channel.

The only thing that can stop a pretty straightforward drop to 2000 would be a megaphone right shoulder (purple scenario).

If the purple scenario is going to happen, you’d usually see a little baby megaphone across the H&S neckline first, and it would break out upwards.

The green scenario would usually be more likely, but I worry that low volume heading into Easter will delay things.

ES Rising Megaphone Breakout Targets 2000

ES has Broken Out of its Rising Megaphone

ES has Broken Out of its Rising Megaphone

ES has broken out of its rising megaphone and bounced at the bottom of its potential price channel.

But the bounce looks weak.  I don’t expect that channel to hold.  If we do see a higher high within the channel, that changes all the scenarios on the chart.  Instead of a trip to 2000, we’d expect a classic B wave retrace, then a C wave up (not drawn on chart above).

ES now has a little H&S on the chart that needs only a breakout downward through the neckline.  If you start seeing repeated fake breakouts, a right shoulder megaphone is forming.  Usually these would lead to a new high for the move out of the March 26 low, but lately these right shoulder megaphones have been breaking out downwards.

Assuming the trip to 2000 plays out, you can expect a bounce or big continuation pattern there.  I expect 2000 to only be a stopping point en route to 1900 and the bottom of the 3-year price channel.

Rising Megaphone Top on ES Move Out of Triangle

ES Formed a Rising Megaphone (Bright Blue) on Overnight Move

ES Formed a Rising Megaphone (Bright Blue) on Overnight Move

ES formed a rising megaphone (bright blue) on its move out of its purple triangle. Rising megaphones are topping patterns.

Usually a rising megaphone would complete with a sideways move to get the price back to the formation bottom, then break out and head down.

Unless you see ES form a price channel inside the rising megaphone, or a new rising megaphone top within the rising megaphone top, this suggests ES will start a move down to 2000 pretty soon.

There should be another rally or continuation pattern at that level.

Overnight Triangle Upward Breakout

They Broke ES Out of its Purple Triangle Overnight - Critical Decision Point Now is 2080

They Broke ES Out of its Purple Triangle Overnight – Critical Decision Point Now is 2080

They broke ES upwards out of its purple triangle overnight. Now it’s nearly back at its orange topping megaphone VWAP level of 2080, which is a critical decision point.

If ES wants to form the pink triangle here, it should either slice through 2080 quite easily or start a megaphone large enough across 2080 to get the price to the pink triangle top (purple scenario).  A subsequent pullback to 2080 and upward breakout through the pink triangle top would target the top of the orange megaphone for the head of a head and shoulders top (red scenario).

ES could also form a fast top at 2080 and reverse there for a second leg down to 2000 in this correction (green scenario).  Then it could rally again to put in a connecting wave before a bigger plunge.

Topping formations can always, at any point, morph into a different topping formation.  The most important thing about this top is whether it pierces the top of the 3-year price channel while forming.  If it does, this topping pattern is likely morphing into a continuation pattern for a big move up.

But that’s doubtful at this point.