FXI: Rising Megaphone Top Within Long-Term Formations
Trader Moe | Feb 10, 2015 12:21AM ET
(ARCA:FXI) is forming a triangle or head and shoulders top within a rising megaphone top. The head and shoulders formation is more likely because of what’s going on in the long-term chart:
FXI is forming a megaphone (bright blue) across VWAP of a longer-term megaphone (red). A megaphone across VWAP of a larger megaphone will often end up morphing into a triangle across VWAP (navy blue in chart).
A head and shoulders within the rising megaphone in the first chart above would get FXI back up to its bright blue megaphone top. A reversal there would lead to completion of both the bright blue megaphone and navy blue triangle.
In theory the triangle could break out in either direction, but after a crash like the one that bottomed in late 2008, the triangle would usually break out downwards to retest the crash low.
Then you would expect a swing to the red megaphone top.
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