ES Trading Set-Ups

ES Red Megaphone vs Gray Megaphone vs Blue Falling Megaphone vs Orange Triangle

ES Red Megaphone vs Gray Megaphone vs Blue Falling Megaphone vs Orange Triangle

ES is bogged down in a megaphone (gray) across VWAP (the volume-weighted average price) of the red megaphone.  ES was legal for a downwards breakout from the gray megaphone to roughly 2300, but got stopped by the March 27 low.

Now ES is back at the gray and red megaphone VWAP and a critical decision point.

The Triangle Set-Up

ES could start a new megaphone across the gray and red megaphone VWAPs.  That would almost certainly mean the orange triangle is going to complete (pink and navy scenarios).  It could break out in either direction, but a upwards breakout would be stopped by the red megaphone top, while a downwards breakout would target at least 2150 and could go all the way to 1800 or even year-2011 territory.

The Sornette Melt-Up Set-Up

If ES tries to form a megaphone across the red megaphone VWAP and then breaks out of it upwards without a retrace to VWAP it’s a Sornette melt-up set-up.  This would mean a fast move to the area of the gray and red megaphone tops (purple scenario).

The Falling Megaphone Set-Up

If ES forms a quick head and shoulders top at the red megaphone VWAP and then plunges down to take out March 27 low, it’s confirming the blue falling megaphone (green scenario).

The falling megaphone would usually bottom with an inverse head and shoulders that tags or crosses 2300 before putting in a right shoulder pullback from the falling megaphone top.  When the price breaks out of the blue falling megaphone and inverse H&S, it would be a strong set-up for a move to at least 2390 and almost certainly a new all-time high at the red megaphone top.

ES Triangle vs Megaphone

ES has a Potential Price Channel (Navy Blue) Set-Up within a Redrawn Triangle (Orange) or the Red Megaphone

ES has a Potential Price Channel (Navy Blue) Set-Up within a Redrawn Triangle (Orange) or the Red Megaphone

ES has drawn a potential price channel (navy blue) or falling megaphone overnight.  A move down to a new low from here or right about here would confirm the channel or falling megaphone.

If a price channel is confirmed, ES would be in the channel’s critical decision wave between starting a bottom (green scenario) and setting up a meltdown (pink scenario).

The pink meltdown scenario is unlikely.  Although ES broke out of a legal triangle (orange) it is more likely to be redrawing that triangle than to actually have broken out of it unless the breakout is a move within the larger red megaphone.

If ES moves straight up from here instead, it is most likely redrawing the orange triangle, which could break out in either direction (purple or blue scenario).

Retesting Megaphone Top

ES is Retesting the Top of its Big Navy Blue Megaphone from Inside

ES is Retesting the Top of its Big Navy Blue Megaphone from Inside

ES is retesting the top of its big navy blue megaphone from inside. As long as ES stays inside the navy blue megaphone top, the short set-up is intact.

ES is Megaphoning Across the Top of its Red Falling Megaphone on the 60-Minute Chart

ES is Megaphoning Across the Top of its Red Falling Megaphone on the 60-Minute Chart

On the 60-minute chart, ES is megaphoning across the top of the red falling megaphone it confirmed Sunday night.  ES did not complete a proper inverse H&S inside the red falling megaphone before piercing its top.

That megaphone could break out upwards (pink scenario), taking ES back out of its big navy blue megaphone and extending the orange rising megaphone on the daily chart.

Or the megaphone could form a series of megaphones inside megaphones to form a continuation pattern here before another big drop (purple scenario).

Or the megaphone could quickly break out downwards to continue the drop within a slightly modified red falling megaphone (green scenario).

Or ES could form a megaphone just underneath the navy blue megaphone top before breaking out upwards to take ES to a new all-time high (orange scenario).

Because ES did not form a proper inverse H&S bottom inside the red falling megaphone, the green and purple scenarios are most likely.

If ES gets going downwards again, there’s a good chance a price channel will set up to break it out through 2300 into a melt-down to at least 2150.  That kind of melt-down set-up would be a perfect entry into the trade if you aren’t short already.

ES Break-In and Breakout

ES is Back Inside Its Navy Blue Megaphone & has Broken Out of its Orange Rising Megaphone

ES is Back Inside Its Navy Blue Megaphone & has Broken Out of its Orange Rising Megaphone

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.

ES has Formed a Falling Megaphone (Red) that will Eventually Need a Retrace to its Top

ES has Formed a Falling Megaphone (Red) that will Eventually Need a Retrace to its Top

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.