QQQ Price Channel vs Rising Wedge Set-Ups on 60-Min Chart

QQQ is Either Putting in the Second Pullback of a Rising Wedge Top  or a Pullback within the Red Price Channel Before a Move into the Start of a Top

QQQ is Either Putting in the Second Pullback of a Rising Wedge Top or a Pullback within the Red Price Channel Before a Move into the Start of a Top

QQQ is pulling back from a pierce of the red price channel top. The red price channel is a roll-up acceleration price channel launched from the blue confirmed price channel.

Because QQQ pierced the red channel top, it’s not likely to retrace all the way to the channel bottom before breaking out to a new high through the red channel top.

That means the next wave up will put a rising wedge top on the 60-minute chart.  With both the price channel set-up and the rising wedge set-up, QQQ is likely to complete this move up with either an extension of the rising wedge or a sideways topping formation like a head and shoulders top or a megaphone top.

QQQ is Completing a Larger Rising Wedge (Purple) within a Megaphone (Navy Blue) on the Daily Chart

QQQ is Completing a Larger Rising Wedge (Purple) within a Megaphone (Navy Blue) on the Daily Chart

QQQ’s rising wedge on the 60-minute chart is an extension of a rising wedge on the daily chart (purple on chart above).  Rising wedges have a technical retrace target of the lowest touch on the formation bottom.  They don’t always put in that full retrace, but because this rising wedge has occurred within a confirmed megaphone (navy blue), QQQ is a strong favorite to put in that retrace.

That’s because megaphones almost always retrace to VWAP (the megaphone volume-weighted average price) before breakout.

QQQ could also pull back all the way to the navy blue megaphone bottom.

QQQ Rising Megaphones on Daily/Weekly Charts

QQQ Rising Megaphones on Daily/Weekly Charts

QQQ is completing the blue rising megaphone on the daily/weekly charts and will eventually have to retrace to the formation bottom (the green scenario would be a classic way to do this).

But QQQ could extend this move up by confirming the orange rising megaphone.  The purple scenario would be a classic way to do that.

Head and Shoulders vs Megaphone

The Green Scenario is the Classic Way to Complete the Orange Rising Megaphone

The Green Scenario is the Classic Way to Complete the Orange Rising Megaphone

ES has pulled back to roughly VWAP (volume-weighted average price) of the blue and red megaphones. A reversal here would set up ES for a classic head and shoulders top (green scenario) on its orange rising megaphone.

ES would usually then break out of both the H&S and rising megaphone for a quick dip to the rising megaphone bottom at 2150.  Because of larger formations on the daily chart, this would be a dip to buy.

If ES breaks the orange rising megaphone bottom before a new high inside the formation, it will like put in the retrace to 2150 in the purple megaphone scenario.

A Rising Megaphone (Navy) on the Daily Chart Makes a New High After a Dip to 2150 a Strong Favorite

A Rising Megaphone (Navy) on the Daily Chart Makes a New High After a Dip to 2150 a Strong Favorite

QQQ Rising Wedge

QQQ has Broken Out of its Blue Price Channel into the Red Roll-Up Price Channel within the Navy Rising Wedge

QQQ has Broken Out of its Blue Price Channel into the Red Roll-Up Price Channel within the Navy Rising Wedge

QQQ has made a legal breakout from its blue price channel into the red roll-up price channel within the navy blue rising wedge.  It’s already pierced the top of its red channel, so that makes a partial pullback and move up into the start of a top (green scenario) most likely.

The green scenario would usually be capable of much more of a final melt-up, but I’m assuming it will be limited by the top of the navy rising wedge.  The green scenario does not have to top with a megaphone–it could extend this move up with something like a rising wedge top for an extended navy blue rising wedge.

The alternate purple scenario represents QQQ putting in the head of a head and shoulders top for the blue price channel.

When QQQ completes the navy blue rising wedge it will also be completing a wave up within the orange megaphone.  The retrace target for the navy rising wedge is the formation bottom, which is at roughly the orange megaphone VWAP (volume-weighted average price).

QQQ could reverse at that VWAP after a bottoming pattern that tags a larger megaphone’s VWAP at roughly 97.60.  Or it could continue down through the orange megaphone VWAP to the megaphone bottom.

The likelihood of a turn at VWAP vs collapse to the megaphone bottom will be determined by how long it takes QQQ to top before that trip down.

More ES Rising Megaphone Scenarios

The Key to Rising Megaphones is to Let Your Position Run Until You Have a Reason Not To

The Key to Rising Megaphones is to Let Your Position Run Until You Have a Reason Not To

The key to rising megaphones is to let your position run until you have a good reason not to. Never anticipate the time to exit or reverse your position when you’re in a rising megaphone, because rising megaphones can extend and extend and because they always give a clear set-up when it’s time to change.

Right now I’m not sure whether the proper top of this rising megaphone is the blue line or the orange line I drew for a top.  I think it’s the orange line, and the smaller waves are just an interior rising megaphone, but I’m not sure.

If it’s the blue line, there’s no way for ES to put a proper H&S top inside the rising megaphone, which means it’s already in a megaphone (red) that will limit its future upside prospects after its likely dip to 2150.

If it’s the orange line, the purple scenario is the most likely, with the blue scenario representing another rising megaphone extension within the orange rising megaphone before ES even begins to top for a dip to 2150.

The farther ES can go before a dip to 2150, the more exciting its prospects after that dip.

I’ll do a post on QQQ tomorrow.