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’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 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.