Trading the head and shoulders pattern
The above chart, we notice from the left of the chart, that price was in a down trend. Soon, it establishes resistance level and drops lower only to rally back up to test the resistance. On successful test of the resistance, price drops back to make a lower low, forming the head and eventually makes the right shoulder.
After this, price breaks the neckline resistance and starts to rally. In terms of the projected price, it is the measured distance from the head to the neckline, projected upwards from the break of the neckline. As can be seen from the chart, price continues on to rally making new highs.
After this, price breaks the neckline resistance and starts to rally. In terms of the projected price, it is the measured distance from the head to the neckline, projected upwards from the break of the neckline. As can be seen from the chart, price continues on to rally making new highs.
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