Today’s Drop Changes Longer-Term Scenarios
Trader Moe | Jul 27, 2015 02:13PM ET
By Continuing Down Today, ES has Raised the Odds of a Fake Breakout from the Red Flat-Topped Megaphone
Over the weekend I posted longer-term scenarios for ES that included the mega-bullish possibility of a run to 2250-2260.
But that scenario required a retrace from Friday’s low to 2100. That retrace would have set up a downward breakout from the orange megaphone on the chart above. If ES had then continued down to the bottom of its 3-year+ price channel, all requirements of the orange megaphone would have been met and we could have erased it from the chart.
Instead, ES continued down to the orange megaphone bottom without a retrace to its VWAP. That’s ominous, because if ES continues down from here to the bottom of the red, flat-topped megaphone without putting in a retrace to 2100 first, it keeps the orange megaphone on the chart–with all of its requirements.
That’s important because it would make the most likely longer-term scenario a fake breakout through the top of the red flat-topped megaphone as ES returns to its orange megaphone top. The orange megaphone would require a retrace to at least its VWAP at 2100, causing the price to reenter the red flat-topped megaphone. But a failed breakout from the red flat-topped megaphone would usually mean a much bigger plunge.
In fact, the failed breakout from the red flat-topped megaphone would likely put in the top of the entire move out of the 2009 low.
So the question is whether ES can retrace to 2100 before reaching its likely target at the bottom of the red flat-topped megaphone. It can’t go much lower without losing the opportunity and blowing the chance of a run to 2250.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.