The Pink Rising Megaphone Means IWM Needs To Get Cracking
IWM is Picking at Its Red Megaphone Top and the Bottom of its Big Light Blue Rising Megaphone
iShares Russell 2000 (NYSE:IWM) is still trying to work its way back to the bottom of the pink rising megaphone within its multi-year red megaphone and navy blue rising megaphone.
It’s picking at its red megaphone top and the bottom of its old light-blue megaphone as it works on what’s like the head of a head and shoulders top for the pink rising megaphone.
As always for a rising megaphone top, timing is important for the pink rising megaphone. Rising megaphones provide great short set-ups when they top with a head and shoulders that breaks out at the same time as the price breaks out through the rising megaphone bottom.
That means IWM needs to get cracking on a trip to the pink rising megaphone bottom, put in a right shoulder bounce, and break out. Otherwise it’s either going higher (light blue scenario) or it’s going to drag out this top some other way.
H&S Vs. Megaphone Crash Scenarios
After IWM finally completes a top for the pink rising megaphone, it’s going for at least the red megaphone VWAP (green scenario) and possibly its bottom (purple scenario).
A trip to the red megaphone bottom would set up a melt-up to the megaphone top. A reversal at the red megaphone VWAP would set up at least a move into the head of a head and shoulders top for the navy blue rising megaphone, and possibly a genuine breakout from the red megaphone in an extension of the navy blue rising megaphone.
Sornette Bubble Blow-Off Top Set-Up
An IWM stab at the red megaphone VWAP that doesn’t get all the way to VWAP would start my adrenaline pumping. A hard reversal above VWAP and a second attempt at selling near the red megaphone top that ends up breaking out upwards would confirm a monster Sornette melt-up set-up on the daily, weekly and monthly charts (orange scenario).
We’d be looking at a target near 200ish and IWM could go much higher. The move would be very fast.
You could even make a case that IWM has just put in in the second bobble of a Sornette melt-up set-up and is breaking out of it right now. A Sornette melt-up set-up is essentially a megaphone that breaks out without a retrace to VWAP. Instead it puts in two smaller pullbacks (bobbles) as the megaphone breaks out.
That’s less likely because the first pullback was so low (the pullback into the October 2016 low) and because of the extended bog-down at the red megaphone top, which began last December. Usually the second bobble of a Sornette melt-up set-up is faster than the first. The idea is that the move should be gaining speed, not losing it.