Get started

Headandshouldersformation

Head & Shoulders Pattern - Advanced AnalysisIn this series about chart patterns we previously discussed narrowing wedges patterns, explaining their identification rules, the measure rule associated with them, and various observations. In this post, we will cover head & shoulders, inverse head & shoulders, and their complex counterpart. We will cover their identification rules, measure rules, and share some observations regarding these unique yet popular patterns. The topics covered in this post are mostly based on the work of Bulkowski on chart patterns (1). 1. Head And Shoulders The head and shoulder pattern also referred to as Head-and-Shoulders Tops by Bulkowski, is a bearish reversal structure commonly found in uptrends, characterized by a series of three maxima with the center maxima higher than the other two. The first maxima is denoted as "Left Shoulder", the second maxima (the highest one in the formation) is denoted as "Head", and the third maxima is denoted as "Right Shoulder". The volume on a head and shoulders formation should be decreasing over time. Bulkwoski points out that symmetry can play an important role in the validity of an H&S pattern. 1: H&S = Left Shoulder < Head > Right Shoulder 2: Left Shoulder ≈ Right Shoulder The first and second maxima are followed by two minima, the line connecting these two-point form the "neckline". Price breaking the neckline downward is a bearish signal (note that a low volume breakout is not indicative of a potential failure). Ongoing H&S on PGAL daily, waiting for the price to reach the neckline. 2. Inverted Head And Shoulders The inverted head and shoulder pattern also referred to as Head-and-Shoulders Bottoms by Bulkowski, is a bullish reversal structure commonly found in downtrends, characterized by a series of three minima with the centre minima lower than the previous two. The first minima is denoted as "Left Shoulder", the second minima (the lowest one in the formation) is denoted as "Head", and the third minima is denoted as "Right Shoulder". Like with a regular H&S, the volume should be decreasing over time. We can see it's simply a regular H&S pattern, but inverted. 1: Inverted H&S = Left Shoulder > Head < Right Shoulder 2: Left Shoulder ≈ Right Shoulder The first and second minima are followed by two maxima, the line connecting these two-point form the "neckline". Price breaking the neckline upward is a bullish signal (note that a low volume breakout is not indicative of a potential failure). Inverted H&S on MTSI daily. 3. Complex Variations Bulkowski presents two complex variations to the H&S and inverted H&S patterns. These complex variations are similar to the regular ones but have the particularity of having multiple shoulders on each side or multiple heads. Inverted complex H&S on ARKW daily. 4. Measure Rule The measure rule for head and shoulders formations allows the determination for the level of taking profits and stop losses after a breakout of the neckline. In the case of a regular H&S, the take profit should be set at the breakout point minus the height between the formation head value and the neckline value where the head is located. The same applies to inverted H&S, the take profit should be set at the breakout point plus the height between the formation neckline value where the head is located and the formation head value. In the case of a complex dual-head H&S formation, the head value that should be selected is the lowest one. 5. Observations Head and shoulders formations can sometimes be encountered within diamonds formations. Osler identifies head-and-shoulders trading as a type of noise trading and points out that the immediate price effect of head-and-shoulders trades disappears slowly but completely over the subsequent two weeks (2). Caginalp and Balevonich found that head and shoulders patterns can be obtained as a consequence of a single group of investors with identical motivations and assessment of the value of the financial instrument (3). 7. References (1) Bulkowski, T. N. (2021). Encyclopedia of chart patterns. John Wiley & Sons. (2) Osler, C. (1998). Identifying Noise Traders: The Head-and-Shoulders Pattern in U.S. Equities. Federal Reserve Bank of New York Research Paper Series. (3) Caginalp, G., & Balevonich, D. (2003). A Theoretical Foundation for Technical Analysis. Capital Markets: Market Microstructure eJournal.
COINBASE:BTCUSDEducation
by LuxAlgo
10
DKNG Potential Head and Shoulders" A. A strong rally, climaxing a more or less extensive advance, on which trading volume becomes very heavy, followed by a minor recession on which volume runs considerable less than it did during the days of rise and at the Top. This is the 'left shoulder.' B. Another high=volume advance which reaches a higher level than the top of the left shoulder, and then another reaction on less volume which takes prices down to somewhere near the bottom level of the preceding recession, somewhat lower perhaps or somewhat higher, but, in any case, below the top of the left shoulder. this is the 'Head.' C. A third rally, but this time on decidedly less volume than accompanied the formation of either the left shoulder or the head, which fails to reach the height of the head before another decline sets in. This is the 'right shoulder.' D. Finally, decline of prices in this third recession down through a line (the 'neckline') drawn across the Bottoms of the reactions between the left shoulder and head, and the head and right shoulder, respectively... " Technical Analysis of Stock Trends / Robert D Edwards, John Magee, W.H.C Bassetti. -- 9th ed. (59) A near textbook example of an incomplete head and shoulders pattern, which indicates a major trend reversal. The pattern is not yet confirmed. One issue is the strong reaction off the neckline, shaded in red, but the overall descending volume is a strong indication. An additional technical indicator is the break and hold below the 50D EMA This is an analysis only, not investment advice.
NASDAQ:DKNG
by BarnardR
1
BTCUSD - H4 - H & S IN PROGRESS !This time the clouds did not hold ... An Head and Shoulder formation is in progress and if this is confirmed, the technical target would be @ 51'436. Therefore, price action over the coming hours will be, once again, very important to look at carefully. Indeed, only a clear recovery above the clouds (around 63'000, already mentioned in my previous analysis !) would neutralise this ongoing bearish mode. Intermediate support levels @ 56'525, 53'292 ahead of the 61.8% Fib ret @ 50'058 ( 39'590-66994 rally) RSI is again below 50. Looking briefly at the daily picture, after having failed to upside breakout the Tenkan-Sen, we can see a "BEARISH ENGULFING PATTERN" triggered yesterday and in this time frame, in order, also to stabilise and neutralise, the ongoing downside risk, we need to see a daily closing above 61'700 which would, at least, trigger a piercing line ! On the downside, a daily closing below the Mid Bollinger Band (currently @ 59'000) would put an additionnal selling pressure and would open the door for the levels previously mentioned. Interesting to note that the 53'292-50'058 coincides with the daily support clouds area. On shorter time frame (H1), we are currently seeing a "corrective* recovery, having in focus 61'330, 61791 ahead of 62'253, the latter coinciding roughly with the secondary downtrend line resistance in this H1 time frame. should we go higher then the 63'000, as previously mentioned would be the pivot level to look at very carefully. Have a nice trading day. Take care Ironman8848
GEMINI:BTCUSD
by Ironman8848
1
Ethereum: A clear path ahead for the end of 2021Head & Shoulders Explained The Head & Shoulders Pattern & Inverse Head & Shoulders Patterns are quite common on Bitcoin and have had great results on the higher timeframe charts. Here are the main characteristics: • VOLUME MIMICS PATTERN • 3 PEAKS, LEFT & RIGHT SIMILAR HEIGHT • TRIANGULAR IN APPEARANCE • FOUND AFTER UPTREND • HIGH SUCCESS RATE • CAN BE SLANTED Price forms 3 distinct peaks after a strong uptrend, the left and right peak should have a similar height (shoulders), the middle peak (head) has to be the highest or this can not be a HS pattern . They should seem triangular in appearance but as long as it fits the main characteristics can still be a valid pattern. The right shoulder should form a lower high which is a early sign of trend change, this is entry A, with entry B being the bearish retest of of the “neckline” (marked on chart #2). The idea is to gain an early entry on the pattern at point A to maximise profits and reduce risk. Once price moves above the middle "peak" it is likely that the pattern is not valid anymore so this allows us to get a tight stop loss upon entry. We measure the height of the pattern and add it to the breakout level for a maximum possible price target. Volume should also paint the same pattern with the 3 peaks, strong volume on breakout increases success rate. ----------------------------------------------------------------- What is General Pattern Failure? General Pattern Failure occurs when a chart pattern breaks out, fails to hit target, quickly reverses then rejects off that same breakout level back inside the pattern continuing in the opposite direction of the breakout. Pictured above in the original post on the left (its quite small but zoomed out to get the bigger picture) is a normal breakout on a Head And Shoulders Pattern. Note how it matches the first example (top left, "Normal Breakout"). General pattern failure can also be considered a Liquidity Grab or can be referred to as a “Fake Out” also when it happens more rapidly after the original pattern breakout. In this example (top right as the example, pointing to the live chart at bottom right) it has come back up to the Head & Shoulders pattern after a long extended period of time, this doesn't mean the failure still cannot occur. Once price gets back inside the pattern chances of higher prices are more probable. ----------------------------------------------------------------- Learning to trade patterns such as these can provide great opportunities if you understand price action and how to identify the key areas of the pattern that other traders and investors may be focusing on too, these areas become important psychological levels on the chart. If you found the idea insightful please share, like or comment, Thank you!
FTX:ETHUSDLong
by Worth_The_Ri5k
EURAUD: Head & Shoulders Monster!!!WOW! Look at the size of that head and shoulders pattern. Retail traders will be all over this! This calls for caution. I won't be trading this method how retail trade it, I will be waiting for the manipulation to occur before I introduce my sell positions. Selling the breakout could be catastrophic because we have an order block resting below the region. Will you be trading the retail method or the smart money method? Leave a comment and/or message us on how we can improve and provide better content, we are open to suggestions to create a better experience for you! Keep in mind that the analysis provided is not 100% accurate and that you can never be certain of the markets. This information given is not financial advice, always do your own research. Thank you for reading, Cheers to many pips!
Short
by AlkalineFX
21
Massive News For BITCOIN Hodler...BTC is performing a huge inverse HEAD & Shoulder pattern in 1D time frame. According to my previous analysis BTC has been unable to broken a very important resistance line. However this inverse H&S pattern will be perform well that resistance can be broken easily and we can see a huge pump in BTC within few weeks. So traders very carefully about this trend line and inverse H&S. It it will be perform BTC exactly hit $85,000. #DoYourOwnResearch# #IamNotaFinancialAdvisor# Thank You !
by iamdinusha
HEAD AND SHOULDER IS THAT YOU??Folks, Be aware of a possible head and shoulders pattern in the Litecoin/USDT pair on the 4 hour chart. The first breakdown of the neckline has got rejected by the bulls.. But simply if it breaks be aware of prices fall back at the horizontal line drawn.. How do you target this? You take the highest price at the head formation and calculate the % it falls back to the neckline. Than You take the same % percentage from the neckline down.. and that is your target price when the neckline breaks and it is a confirmed head and shoulders pattern. There is a lot of symmetrical in trading...
by MoneyMakingMuro
What is Head and Shoulders Pattern?Introducing series topics of trading systems we gonna do on Tradingview and hope readers can learn something from our educational content. Three main systems are the followings: 1)Pattern recognition 2)Trending following 3)Counter trend Start with pattern recognition, and we will mainly cover two main categories of price patterns: Major Reversal patterns and continuation patterns. Then introduce today’s educational content: H&S pattern , which is probably the most reliable and best known of all major reversal patterns. Most of the other reversal patterns are just variations of H&S. Volume Factor: H&S Pattern is relatively easy to recognize but many people ignore the importance of volume: The head should take place on lighter volume than the left shoulder which indicates a diminishing buying power. And volume should also expand on the breaking of the neckline to confirm the pattern. Price Target: :Also the price target is not guaranteed to be the height of pattern, height may only be a minimum target. Also when we take other factors into consideration such as pivot support area, we need to adjust our price target rather than brainlessly using the height of the pattern as price projection. Coming back to the topic Bitcoin chart as of today. Bitcoin is also forming the same pattern on a larger time frame. What do you think, will Bitcoin hold the neckline and rebounce above the right shoulder to form a new bullish trend or will Bitcoin break the neckline with volume confirmed to aim for the next pivot support (also the previous breakout level) around 20,000? Follow us for more education content on Technical Analysis. Next Topic Preview: The Inverse H&S pattern
BITSTAMP:BTCUSDEducation
by Coinlog
6
Reverse head & shoulders pattern forming in the hourlySo yeah there is a reverse head & shoulders pattern forming n the hourly fairly nice looking at this time it is 8:59 AM EST I would say by tomorrow we should be on the upper side of things. I could be wrong so please DYOR & If you want to be safe just wait for confirmation that you're comfortable with. This is not financial advice this is my own opinion using tools that I understand and years of trading experience. As always Happy Trading Traders & Never Trade Leverage.
COINBASE:ADAUSDLong
by PacMan1337
EURUSD could start its descent from hereFor the last week, I've been anticipating a drop in EU, and now, it finally looks like the bulls are starting to lose strength. The resistance zone has been retested multiple times since yesterday and failed to break above. I am expecting one more push down completing the H&S before the next wave up. As of now, the price hasn't even started to break any important levels and that is why this idea is for preparation in case it does. Another spike up in the equity markets could push DXY down triggering EU to break above the resistance zone. Support for this idea: Minor order block looks like it might break any moment. (Bigger order block structure has to break below 1.195) Break of minor trendline support LTF trendline support is not far below Looking for the H&S structure to complete before the next wave up Start to look for price action to push EU down and look for safer entries or scaling in, with a break below the bigger order block and LTF bullish structure around 1.95 & retest around 1.96. Just a note, I already entered this trade with a high-risk entry at 1.199. If it breaks below 1.95, I will be looking for scaling in entries. Invalidation for this idea would be a break above 1.2. Let me know your thoughts. Trade Safe! HEET
Short
by AfterlifeTrading
6
BTC - ONGOING POTENTIAL HEAD AND SHOULDERS IN PROGRESS ON D1...D1 : Recent price action is confirming a potential Head and Shoulders in progress on D1. Nevertheless, such kind of formation will be confirmed only by a breakout of the neckline which for the time being is still away of current level... Important to note, that for the time being, on D1, the BTC is still above the MID BOLLINGER BAND ! A daily closing below 56700 confirmed by another breakout of the Kijun-Sen @ 56070 would also add more selling pressure, having in mind the H & S neckline level, currently around 54000/53500. H4 : Recent recovery from the expected target reached yesterday (see previous H1 analysis) triggered a small recovery which still should be seen as a corrective move only in a bear trend. Indeed, BTC recovered towards of high of 58501, reaching nearly the 61.8% Fib ret @ 58527 ! In addition, this recovery also failed to recover above the Mid Bollinger Band and currently BTC is traded somewhere in the middle of the clouds support zone. Again and again, watch carefully at the clouds on which the bottom line is currently around the 55000 area. ONLY A SUSTAINABLE RECOVERY ABOVE 60'000 WOULD INVALIDATE THE EXPECTED BEARISH SCENARIO
BITSTAMP:BTCUSD
by Ironman8848
2