IWM Retest of Major Rising Megaphone Bottom

IWM Retested the Bottom of its Long-Term Rising Megaphone (Purple) Today - Next Target is Pink Megaphone Bottom

IWM Retested the Bottom of its Long-Term Rising Megaphone (Purple) Today – Next Target is Pink Megaphone Bottom

IWM retested the bottom of its long-term rising megaphone top today.

It should continue down from here to the bottom of the major pink topping megaphone before a bounce back to its VWAP.

If IWM should reenter the rising megaphone instead, it’s likely headed to a little over 120 to tag VWAP of its interior topping megaphone.

Breakdown of Today

Today's Price Action was Most Likely a B Wave (Connecting Wave) Before Another Move Down

Today’s Price Action was Most Likely a B Wave (Connecting Wave) Before Another Move Down

ES has a topping triangle (navy blue) on its chart at the top of last week’s weird Neely rising wedge. It’s already broken out downwards from that triangle to VWAP of a larger topping megaphone (bright blue).  From there it bounced into what looks to me like a B wave (or connecting wave) before a fast move to the bright blue megaphone bottom.

That megaphone bottom will probably redraw itself on this drop so that it will be less steep.

The B wave is both a megaphone and an abc into a head and shoulders.  The head and shoulders has broken out through its neckline after hours.  The market could still throw some curves, but it’s a good bet the move off last Monday’s low has topped and is started into a move down to take out that low.

If you’re already short, I’d just hang on until the price takes out last Monday’s low.  (If something changes, I’ll post it.)  Last Monday’s NYMO close below -100 is such a strong set-up for a short to a lower low that you really don’t want to bet against it unless an actual set-up shows up to cancel it, which I doubt.

If you’re not short yet and you want to play this move, I’d short from a breakout downwards from a topping formation at either the pink or blue megaphone VWAP after a bounce to that VWAP from the megaphone bottom.

Otherwise, if you’re waiting for a set-up to go long, I’d wait for ES and SPY to take out last Monday’s low.  There will be multiple set-ups down there to get long, including a genuine upwards breakout through the level of that low after a lower low.  The upwards target will depend on how big of a drop the price makes from the neckline of the H&S on the daily chart.

 

Trading Notes

The California lunch hour crowd’s buying was so aggressive it may be bearish.  The buying off the channel low increased the odds of a triangle forming here.

If–that’s IF–a triangle forms here (green scenario on chart below) an H&S is completing on a connecting wave down to some megaphone bottoms.

If a Triangle Forms Here (Green Scenario) It's Bearish

If a Triangle Forms Here (Green Scenario) It’s Bearish

If a megaphone forms instead, it would typically mean a squeaker new high past today’s high so far.

Potential Price Channel on 2-Minute Chart (Updated)

A Lower Channel Low Would Put ES in the Critical Decision Wave of its Red Price Channel

A Lower Channel Low Would Put ES in the Critical Decision Wave of its Red Price Channel

A lower low within the red price channel would put ES in the channel’s critical decision wave between starting a bottom and setting up a breakout into a melt-down channel.

A meltdown would target roughly 1900 before a likely pullback to ES 1960ish. A bottom here would likely set up a move into the head of an H&S top or maybe just a retest of Friday’s high if a triangle top is forming.

Update:  Forgot about pink interior megaphone on chart, which would usually require a bounce off roughly 1950 back to roughly 1966 before breakout to larger megaphone bottom at 1900.

Also note that a bottoming pattern could also turn into a continuation pattern.

Oil Rising Megaphone Across Inverse H&S Neckline is Bearish

Oil Rising Megaphone (Red) Across Inverse H&S Neckline (Blue) is Likely Setting Up a Megaphone Move to a Lower Low

Oil Rising Megaphone (Red) Across Inverse H&S Neckline (Blue) is Likely Setting Up a Megaphone Move to a Lower Low

Oil’s put in some amazing short squeezes over the past few days, putting in a breakout through the neckline of an inverse H&S on its chart.

However, the breakout has taken the form of a rising megaphone (red on chart) across the inverse H&S neckline, and that is bearish.

Oil would usually form a head and shoulders inside the red rising megaphone before breaking out downwards.  That would be a set-up to short for a retrace to at least the lowest touch on the formation bottom.

But the reentry through the inverse H&S neckline suggests oil will be putting in a deeper retrace than that.  Oil’s got great odds of making it down to a lower low to morph the inverse H&S into a megaphone bottom (pink).

Larger Top Forming?

Today's Price Action Could Be a Connecting Wave Before a Plunge - Otherwise a Larger Top is Forming

Today’s Price Action Could Be a Connecting Wave Before a Plunge – Otherwise a Larger Top is Forming

Today’s price action could be a B wave before a C wave down to the bottom of the bright blue megaphone top.

Or it could be part of a larger top forming–a triangle or H&S most likely.

Something will become clear shortly.

ES Overnight

ES has been Megaphoning All Night After Initial Drop - Green Scenario is the Favorite

ES has been Megaphoning All Night After Initial Drop – Green Scenario is the Favorite

ES is still working on a topping megaphone.

The green scenario is the favorite, but I can’t rule out the purple.

ES could also probably form enough interior megaphones to take out the navy blue triangle high right here, but usually the price wouldn’t hang around very long after completing last week’s wedge.

ES blew a price channel melt-up set-up overnight, as well as a Sornette melt-up set-up.

Sunday Night (Updated)

ES Topping Megaphone

ES Topping Megaphone

ES broke out downwards from Friday’s little triangle (navy blue on chart).

That’s bearish.

But I don’t think bears are really safe until ES clears the bright blue megaphone on the chart.

There’s a teeny little price channel off tonight’s low so far that is in its critical decision wave–retesting the navy blue triangle bottom–as I type this.  If ES gets going on a breakout upwards from that, it’s likely going to melt up to the blue megaphone top (purple scenario).

But if ES makes it back to the little price channel bottom, it’s likely headed down to the megaphone bottom in the green scenario.

Little Price Channel (Blue) Off Tonight's Low So Far

Little Price Channel (Blue) Off Tonight’s Low So Far

ES should then retrace to the megaphone VWAP, which would make it legal for a downwards breakout.  Even then, you have to stay mindful that ES could put in one final melt-up through VWAP to the blue megaphone top.

Offhand I can’t think of any other right shoulder set-ups of this particular type (see earlier weekend posts) leading to that much of a higher high.  But I can’t rule it out.

Update:  ES made it back to the bottom of its little price channel off the night’s low so far.  That means it’s likely forming a top for this bounce before a move to the blue megaphone bottom.  Then back to VWAP for the critical decision.

By Returning to its Blue Price Channel Bottom, ES has Cancelled Its Potential Melt-Up Set-Up

By Returning to its Blue Price Channel Bottom, ES has Cancelled Its Potential Melt-Up Set-Up

Thanks for the good comments section tonight. Can’t answer at the moment, but good stuff.