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Tagged: Head and Shoulders
after a good uptrend if the charts form a pattern in the shape of the head with two shoulders then it means that more likely the trend will reverse. Generally the right shoulder will have good volume and the left shoulder will have less volume.
Head and Shoulder pattern appears in a stock price movement when two equivalent tops are identified along with a significantly taller top between them. This happens when a strong hand liquidates a stock.
Conditions:
(Head appears because a stronger hand cannot sell all the stocks at once. They have to buy sometimes in order for them to sell the stocks.)
Short position can be created when the price crosses the neckline.
Its a distribution pattern, bearish trend reversal
This pattern depicts stronger hands selling their stocks gradually
It takes minimum 3 months of time to form
If volume in lower in right hand shoulder means stronger hand moved away from the market
Go for a short position once curve goes down previous lower bottom (below neck line)
Head and Shoulder determines the recent price pattern, generally the volume during the Left shoulder should be highest, the duration to form each pattern shoulder, Head, Shoulder is minimum 1 month. Right shoulder volume should be as low as possible, short position can be considered while breaking down the neck line. This is formed when stronger hands gradually start selling stocks in the initial stage the stronger hands will keep on buying and selling stocks but maximise selling of the stocks till all the stocks are sold automatically the price goes down this trend is called determined as bearish trend.
the characteristics of the head shoulder pattern is with its 3 peaks with center the highest of the three and
Duration between each is a month
the volume should be highest on left side top and lowest in the right top.
when the price breaks the neck line bearish trend is determined
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