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