XLE Megaphones with Potential Melt-Up Set-Up

XLE has a Potential Sornette Melt-Up Set-Up on its 60-Minute Chart

XLE has a Potential Sornette Melt-Up Set-Up on its 60-Minute Chart

XLE has formed a beautiful megaphone inside a megaphone on its 60-minute chart.  Even better, XLE has formed a potential Sornette melt-up launch pattern across VWAP of the red megaphone.

An upwards breakout through the navy blue megaphone VWAP, typically with a double bobble as the orange megaphone fails to retrace to VWAP, would target the red and blue megaphone tops.  The move would usually be fast (green scenario).

The light blue scenario represents a series of megaphones inside megaphones across the navy megaphone VWAP.  We’d usually see this is a triangle right shoulder is forming on the potential inverse head and shoulders bottom on the daily chart (see below).

The purple scenario represents a top before a collapse back to the 2016 (see below).

 

XLE Inverse H&S Bottom with Right  Shoulder Triangle vs Neely Set-Up

XLE Inverse H&S Bottom with Right Shoulder Triangle vs Neely Set-Up

XLE formed a price channel on its move down from the June 2014 high to the January 2016 low.  That kind of move is a Neely set-up for a partial retrace then retest of the low before a melt-up back to the all-time high (purple scenario).

The green scenario on the daily chart is a triangle right shoulder on the inverse H&S before a breakout to retest the all-time high.  It’s possible but unlike (because of the megaphones on the 60-minute chart) that XLE will break out of that inverse H&S without a triangle right shoulder.

The Neely set-up is the favorite longer-term.

16 Comments (To enlarge images, right click on image & then click "view image") → XLE Megaphones with Potential Melt-Up Set-Up

  1. Dusty Nugt

    u nailed it agan Moe – sum tymes u muss amaze ur self – u amaze me – thx so much 4 ur help – n yes on all public calls – i call it ” a listin ship = doan gitt ur shoes wet – run udder side as fast as u can – imo Corzine is idiot n shuld b in jail wiff HRC ! thx agan 4 ur amaz;n werk !!!

    Reply
  2. ewtnewbie

    Ok, my research is done. We are stuck between a long and a short now. Longs still hold the cards in my book until this one breaks, then the trend is up in the air.
    ….
    Long is built from 2317.75-2404.50 and has a LIS of 2350. Yup, it was broken in the O/N session last night, but not during RTH. Until it breaks in RTH, I’ve got to respect the setup. HOWEVER….
    the short is built from the 2404.50-2344.50 and has a resistance zone of 2374-2382 and it traded and has had a pretty decent reaction from the 2375 down to 2360 area. The PT on that is 2330.50 ESM17.
    ….
    Purists are going to say that the long setup is broken with the O/N action and therefore, I push up to the HWB short was what is required. I agree, but if I wait for confirmation with a break of 2356 to load in a small short and then break 2350 to further confirm the longs are having issues, I’m going to feel a lot better about not being a bear that gets his face ripped off (as so many have done before). Funny that the rising MP I’ve drawn on my ES chart has a target of 2332 for a retrace!!!! If we get there however, the previous LONG setup that prompted this run from 2317.75 to over 2400 is still intact and waiting to support this market. The LIS on that support zone is around 2298. Break that setup and I think things get REAL interesting and likely get *another* run at a HWB short around 2350 again (and I’m sure a VWAP will live there). Hope those help someone nice out there.

    Reply
    1. ewtnewbie

      Pushing right up against the ES LIS near 2382. Go figure. LOL.

      Easy short here, as the stop isn’t that far away and the rewards (2331 PT from 2380) makes the risk:reward ridiculous. Took a shot at the weakest sister, YM at this level 20,740 and we’ll see how that pans out. TGIF and GLTA! You rock Moe!

      Reply
        1. ewtnewbie

          OK, NQ and ES broke their 61.8 lines on the HWB short, YM did not. YM has been leading the way, but that just adds to the mystery. Just like the ES broke the 2350 area to tag 2344.50 overnight but not in RTH, expecting a bounce back to the HWB short. Now with a break of the HWB short LIS, expecting a drop to the 2344.50-2383.25 50% line at worst and could just drop to the 2370 area on the ES and then take off *IF* the bulls are still in control. I’m expecting a close today right near 2370 or just above for maximum confusion. All the indices are showing signs of fatigue on the short term charts, but hey, when has that ever stopped an OpEx Friday ramp from happening, eh? TGIF.

          Reply
  3. ewtnewbie

    Moe, et al….
    Sornette setup on the 5-min ES chart of today? O/N low is the line to defend, or is it 45.75?

    I have a broken ES extension short when it tagged 2367.50, so I am expecting a fall into support from the 2344.50-2367.50 pull that has 2353-2356 as the support zone with a PT of 2373. In a perfect world, that will trade right at 1:30 eastern to kick off the afternoon long trade. The 2353-6 level also is part of a DRAGON trade I’ve talked about before as well, that would be near yesterday’s RTH low. Classic support and resistance stuff just expressed differently. GLTA!

    Reply
    1. snake oiler

      nice catch, it’s at VWAP too. sornette is tough cuz i don’t like to place marketable limit orders. on 5 minute time frame, may need to buy on a stop above the second bobble. what kind of pattern does the double bobble usually make? triangle? and what’s the dragon pattern?

      Reply
      1. ewtnewbie

        Looks like we are trying to break it out. If 2367.50 goes, it could “fly” quickly. Thanks for the confirmation snake oiler. Have 2 ES going from 65, all I was willing to “invest” on this idea. Given my entries, it is likely a very, very bad idea….but hey, I’ll try anything once. :-)

        Reply
        1. ewtnewbie

          Took one off at 2370 for 5 points, holding the second one with a stop below 2365 to see where we go. Never have enough contracts on when we need them, but hey, a nice trade nonetheless. Hope others are on it too! Cmon Sam, let’s get your 238 SPY to unload your short puts!

          Reply
  4. ewtnewbie

    As long as today’s action holds up (I’m headed out to teach, so not sure I’ll be available to post), but the VIX buy signal will likely trigger on two fronts: vix price above the 10 day MA, PPO > +10, and a filled candle (price closes lower than the open) plus a close outside the BB and now a potential close inside the BB. Just sayin’….holding those June calls on those reasons alone.

    Reply

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