Scribd
Upload
28 views2 pages

Heads and Shoulders Pattern 1 Heads and Shoulders: Price Objective

The Heads and Shoulders pattern is a reversal pattern that moves against the previous trend. Figure 1 shows an example of an uptrend reversing into a downtrend after a Head and Shoulders pattern forms. Figure 2 shows an inverse Head and Shoulders pattern where the trend reverses from downtrend to uptrend after breaking the neckline. Volume is crucial in confirming the pattern, with high volume occurring on the breakout in the direction of the predicted trend reversal. The price target can be estimated by taking the difference between the head high and neckline and subtracting it from the neckline price.

Uploaded by

Jack William
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as ODT, PDF, TXT or read online on Scribd
28 views2 pages

Heads and Shoulders Pattern 1 Heads and Shoulders: Price Objective

The Heads and Shoulders pattern is a reversal pattern that moves against the previous trend. Figure 1 shows an example of an uptrend reversing into a downtrend after a Head and Shoulders pattern forms. Figure 2 shows an inverse Head and Shoulders pattern where the trend reverses from downtrend to uptrend after breaking the neckline. Volume is crucial in confirming the pattern, with high volume occurring on the breakout in the direction of the predicted trend reversal. The price target can be estimated by taking the difference between the head high and neckline and subtracting it from the neckline price.

Uploaded by

Jack William
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as ODT, PDF, TXT or read online on Scribd
You are on page 1/ 2

Heads and Shoulders pattern

Heads and Shoulders pattern is a reversal pattern that, when formed, moves against previous trend.
1 Heads and shoulders

Figure 1
Figure 1 is formed from uptrend and ,after head and shoulders, goes downtrend.
The heads and shoulders are sets of peaks and troughs.
2 inverse head and shoulders

Figure 2
above figure, after breaking neckline it likely goes uptrend.
Volume: is very crucial. For heads and shoulders pattern, For the head-and-shoulders pattern, volume
is used mainly at the point of breakout to help confirm the pattern. At this point, it's
important that the breakout happens on a large-volume move. For a head-and-shoulders top,
when the price breaks below the neckline (in a downward direction), it's best when this
occurs during a large volume increase, which signals heavy selling. This strongly indicates
that the underlying supply and demand in the market is moving in the same direction the
chart pattern is predicting.
The peak formed in the right shoulder should be seen with even lighter volume than in either
the head or the left shoulder. And again, the volume should be high when the neckline is
broken,
Price objective

Price can be predicted. Lets say peak of the head is formed at $50 and neckline at $40. 50-40=10
40-10=30. it predicts that it could go until at $30.

You might also like