Rising Megaphone Upward Breakouts

DIA Long-Term Rising Megaphone with Price Channel Set-Ups

DIA Long-Term Rising Megaphone with Price Channel Set-Ups

Yesterday I posted DIA’s rising megaphone with a classic megaphone/head and shoulders topping and retrace scenario (above).

GLD Put in a Classic Top Before Retracing to Its Red Rising Megaphone Bottom

GLD Put in a Classic Top Before Retracing to Its Red Rising Megaphone Bottom

Gold put in a similar top before retracing to its red rising megaphone bottom. If it can break out through the bottom here, it will retrace to the red rising megaphone bottom.

AMZN Broke Out Upwards from its Blue Rising Megaphone

AMZN Broke Out Upwards from its Blue Rising Megaphone into a Rising Wedge

But rising megaphones don’t always complete in the classic way.  There are ways they can extend.  For example, AMZN failed to break out its blue rising megaphone bottom.  Instead it broke out the top and converted a classic head and shoulders top on the rising megaphone into a huge rising wedge top (red).

It will likely form a megaphone up here to complete the rising wedge.  This megaphone could break out in either direction once it completes.

AAPL Extended its Toop on the Blue Rising Megaphone

AAPL Extended its Top on the Blue Rising Megaphone

And AAPL, instead of breaking down through its blue rising megaphone bottom, converted its classic H&S top into a giant rising megaphone top that could extend as well.

These are not the only ways for rising megaphones to extend.  For example, any wave within a rising megaphone can extend to form an interior rising megaphone.  And a rising megaphone can put in a new high after breakout through the bottom, before retracing to its target, under certain conditions.

The point is that every topping formation can break out in either direction and every rising wedge or megaphone can break out in either direction.  There are always ways for moves to extend as the market gets new information that may challenge the assumptions that built a trading formation.

Dow Rising Megaphone

DIA Long-Term Rising Megaphone with Price Channel Set-Ups

DIA Long-Term Rising Megaphone with Price Channel Set-Ups

The Dow broke 21000 this morning and it’s in a price channel melt-up set-up within larger set-ups that suggest it’s got some more melting up to do.

DIA (the Dow ETF) is in a rising megaphone (blue) that started forming in April 2010.  The wave up out of the 2011 crash formed a price channel (red) that broke down from the channel in its critical decision wave to start a top in summer of 2015.

Now DIA is in both the head of a head and shoulders top and the 5th wave melt-up of a megaphone top (purple).  The wave up out of the dip of January/February 2016 formed another price channel that broke out into a melt-up set-up perfect for a megaphone 5th wave finish.

The green scenario represents the standard way this megaphone and H&S would complete.  The top at the blue rising megaphone top could be a lot bigger and take a lot longer to complete than drawn.