ES is back inside its navy blue & light blue megaphones and has broken out of its orange rising megaphone after a legal top.
That means we ought to see at least 2150 before we see ES break out of the navy blue megaphone again, and we could see the navy megaphone bottom. If ES makes it to the navy blue megaphone bottom, we could even see the megaphone break out downwards into a huge correction after a retrace to its VWAP.
Big megaphone moves down often start with a price channel melt-down set-up. But instead, ES has set up a falling megaphone (red on 60-minute chart) since its March 16 retest of the high.
ES could form a price channel inside the red falling megaphone and melt all the way down to 2150 inside it (green scenario). Or the move to 2150 could be a lot messier, with ES forming an inverse H&S bottom around here before retracing to the red falling megaphone top and heading down again (purple scenario).
If we get the purple scenario, it would likely be slow moving enough for the move to the red falling megaphone top to be another retest of the big navy blue megaphone top from inside.
Anyway, at this point you should be short as long as ES is inside that red falling megaphone. If you don’t mind hanging on through retraces and you’re not playing something time sensitive like options, you could be short unless ES breaks back out of the navy blue megaphone top.
This would usually be a strong short set-up. The only thing nagging at me about it is that ES failed to complete a potential extension in the orange rising megaphone and put in an indecisive, awkward top on the navy blue megaphone. That means you have to take your stops seriously in case ES heads up one more time to put a bigger top up there.