- This topic has 264 replies, 262 voices, and was last updated 2 years, 7 months ago by
.
-
Posts
-
Head and shoulder pattern is a bearish trend and we can create a short position
conditions :
1. it should take three months to form this pattern
2. and the volume in the left shoulder should be high and the right shoulder should be low then only we determine the head and shoulder
3. short position can be created when it goes below the neckline.
Head and Shoulder is a technical analysis term used to describe the chart formation in which the stock price,
1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.
The first and third peaks are shoulders, and the second peak forms the head.
Conditions to determine the Bearish Trend :
Left shoulder -> Price rise followed by a left price peak, followed by a decline.
Head -> Price rise again forming a higher peak.
Right shoulder -> A decline occurs once again, followed by a rise forming the right peak which is lower than the head.
A trade can be initiated after the pattern is complete and a short position can be created once the right shoulder moves downward breaking the neck line with significant volume.
*Note : Formations are rarely perfect, i.e, there may be some noise between the respective shoulders and head.
Head and shoulder is a distribution pattern
Conditions:
should have significant rally before the pattern
l. shoulder should have high volume
head is highest
duration of each pattern (shoulder, head, shoulder) is 1 month
r.shoulder volume is low
short position in the neck line.
Please clear my doubt. How much time does it take for the head and shoulders pattern to form? Handout says 1 month whereas the YouTube video says 3 months. Which one is correct?
A head and shoulders pattern is a chart formation that appears as a baseline with three peaks: The outside two are close in height and the middle is highest.
Left shoulder: Price rise followed by a price peak, followed by a decline.
Head: Price rise again forming a higher peak.
Right shoulder: A decline occurs once again, followed by a rise to form the right peak, which is lower than the head
- You must be logged in to reply to this topic.
