Yen Critical Decision Point

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen futures have completed an inverse head and shoulders bottom with a megaphone right shoulder (silver) on the drop out of last August’s high.

The yen has just retraced to VWAP (the volume-weighted average price) of that megaphone right shoulder and is now legal for a breakout upwards from the inverse H&S (purple scenario).

But if the yen can break down through VWAP for a trip to the megaphone bottom, if will put in a new low for the move out of the August high and confirm the blue falling megaphone.  That would be nice to see because it would usually provide a strong set-up for a melt-up to the formation top (green scenario).

The yen could also bog down forming megaphones inside megaphones across the silver megaphone VWAP (pink scenario).  This would usually mean a continuation triangle before a move to a new low to complete a wider falling megaphone.

6 Comments (To enlarge images, right click on image & then click "view image") → Yen Critical Decision Point

  1. snake oiler

    great analysis as usual, Moe. question: if megaphone shoulders are more indicative of reversals than triangle shoulders, does the shape of the triangle shoulder reinforce the bias (ascending triangle vs. descending)?

    If this helps anyone, the hourly time frame on yen futures looks like there is passive selling on offers over 8855 (see moe’s white paper on the inventory effect).

    Say, did you go to the Blackjack ball? Dancer/Munchkin had some warm words about Arnold Snyder (and his mic) on their podcast.

    Reply
    1. Trader-Moe

      Snake Oiler, yes, one of the strongest set-ups you can ever see is a head and shoulders with a rising wedge right shoulder for a downwards breakout or an inverse head and shoulders with a falling wedge right shoulder for an upwards breakout.

      I didn’t make it to the Blackjack Ball this year (I usually go). But Dancer, Munchkin and Snyder are all good friends/former teammates. Thanks for the heads up–I’ll have to ask them about it.

      Reply
      1. snake oiler

        without regard to order flow/queues, I would have thought that a descending triangle shoulder on H&S would be lead to scarier downward breakouts.
        But what you’re saying makes sense: a wedge pattern helps make the H&S visual more compelling.

        Reply
        1. Trader-Moe

          Snake Oiler, H&S patterns are so well known that right shoulders should be a straight-out repricing from the neckline price to the price at roughly the level of the top of the left shoulder.

          If instead the right shoulder is getting sold into (a rising wedge), it’s big money desperately trying to get out before the crash.

          Reply

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