IWM Backs Away From Megaphone Top

IWM Backs Away a Second Time from its Red Megaphone Top

IWM Backs Away a Second Time from its Red Megaphone Top

Every time I think the market can’t possibly correct, I look at the long-term IWM chart.

Not only do the 3-year+ red megaphone and blue rising megaphone require a retrace to at least the red megaphone VWAP at roughly 113, but IWM continues to tag its red megaphone top and back away from it.

The market lacks the enthusiasm to even break IWM out of the red megaphone for a topping pattern on top.

IWM could also correct all the way to the red megaphone bottom (purple scenario).  The purple scenario becomes the favorite if IWM breaks through the red megaphone top to put a big head and shoulders pattern on top.

Critical Decision Point for IWM

IWM is Back at the Top of its Red Megaphone

IWM is Back at the Top of its Red Megaphone

IWM is back at the top of the big red megaphone that it’s been working on since December of 2013.

IWM is now at a critical decision point for whether to remain in this megaphone for years or put in a megaphone top inside the formation that would allow an upwards breakout from it after a retrace to VWAP (green scenario).

If IWM puts in a significant break through the red megaphone top, it is likely to take some time forming a large top (pink scenario) before a plunge to and through the megaphone bottom.

The purple scenario represents the green scenario with a trip to the megaphone bottom before another trip to its top.

IWM Back at Megaphone Top

IWM is Back at its Red Megaphone Top

IWM is Back at its Red Megaphone Top

IWM is back at its red megaphone top after confirming the navy blue rising megaphone.  Now it needs to put in a topping formation before a dip to at least the red megaphone VWAP and possibly the red megaphone bottom.

A fast top here would make the purple scenario more likely.  That represents strong buying at the red megaphone VWAP to move IWM to another new all-time high that would be the head of a head and shoulders top for the navy blue rising megaphone.

If IWM breaks out of the navy rising megaphone and its H&S top at the same time, it’s a favorite to make a fast correction to the navy rising megaphone bottom.

A move through the red megaphone top to put in a prolonged topping process would make the green scenario more likely.  This faster crash to the red megaphone bottom would set up the silver rising megaphone and another move to the red megaphone top.