ES Topping Triangle Comparison with an Oil Topping Triangle

ES Completed the Red Topping Triangle with a Fake Breakout Through and Topping Formation at the Top and Should Break Out Downwards to Take Out the August 24 Low

ES Completed the Red Topping Triangle with a Fake Breakout Through and Topping Formation at the Top and Should Break Out Downwards to Take Out the August 24 Low

Today ES completed a fake breakout and topping formation at the top of the red triangle to top the move out of the August 24 low.

The way these tops typically play out is with a retrace to the triangle top and then a breakout through the formation bottom.

Oil Topping Triangle

Here is a long-term topping triangle example on oil.  The fake breakout and topping pattern at the top are difficult to see, so I include a closer look below.

Example of Topping Triangle on Oil

Example of Topping Triangle on Oil

Here is a closer view:

Note the Similarities Between the ES Topping Triangle and this Oil Topping Triangle

Note the Similarities Between the ES Topping Triangle and this Oil Topping Triangle

Details of Topping Triangle Structure

Note the similarities between the ES triangle and the close-up view of the oil topping triangle.  The final wave up of both bogged down around the triangle middle before melting up in a rising wedge to a fake breakout through the triangle top. Then a head and shoulders completed with a neckline at the triangle top before the price broke back into the triangle.

All of this is pretty much standard for this type of topping triangle.

Most of these triangles put in a hard wave down upon reentry into the topping triangle.  We got that move down in ES today, and you can see oil’s reentry into its topping triangle below.

Oil Reentered Its Topping Triangle with a Hard Wave Down

Oil Reentered Its Topping Triangle with a Hard Wave Down

Oil put in a megaphone at this point to swing the price up for a retest of its triangle top before breaking out the bottom.  ES is likely to do the same thing before breaking out the bottom of its topping triangle.

Topping Triangles Tend to Break Out into Strong Moves Down

Topping triangles tend to result in strong moves down because many traders don’t accept the idea of a topping triangle and see the internal structure of the formation as bullish.  So they tend to be positioned incorrectly for the breakout.

Whether you think this formation should be called a topping triangle or something else, it’s worth paying attention to the details of the formation structure because you will see a lot of them on all time frames and they are strong trading set-ups.

9 Comments (To enlarge images, right click on image & then click "view image") → ES Topping Triangle Comparison with an Oil Topping Triangle

  1. ewtnewbie

    Great post Moe. There could be an impulse wave down (5 waves) to start the W5! The W4 triangle may be over with the ramp up being the ‘e’ wave. We should get a ii of W5 tomorrow. Time will tell. Then it gets very interesting with a iii of 5 down, if we aren’t going to do an Ending Diagonal. Wave ii of 5 meets your thoughts of a return near the top of the triangle, but I think it will actually pierce it. I believe any price in the 60’s or even tagging 1970 would be an excellent short area.

    Reply
      1. ewtnewbie

        Haven’t hit the PT, although a new low was made O/N, so at least we are making lower highs and lower lows. Last harrah? Rollover is today, so volatility and BS are the norm. By the way, isn’t this a Triple/Quad witching situation, so have you dusted off the playbook for us?

        Reply
      2. ewtnewbie

        Somebody wants their O/N fill. The O/N high and low are in danger of being tested, but I think the high has a better chance of getting tagged, JMHO. We are in iv of c with v of c to set up the last spurt. Hope I’m wrong!

        Reply

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