Company : IDFC Ltd., Infrastructure Development Finance Company… a Financial Service Company.
Type of chart: Candlestick type.
Head & Shoulder is a Distribution pattern and the same is illustrated in the chart.
The chart shows formation of Head & Shoulder and Head is identified with Left & Right Shoulders. The time line to form entire pattern is more than 3 months. This Pattern Generally called Distribution Pattern due to their Behaviour.
What causes this pattern is few stronger hands like Institutional investors, FII, FPI, etc., intends to off load their stakes (shares) in a short span of time. However, this short span does not mean selling all shares at once. Initially, thru Buy-sell activities, demand is being created and many retailers/traders are pursued to buy. Selling are increased in batches by the Institutional investors and subsequently after off-loading, gradually they move out of market. This illustration is depicted in the chart.
It may be seen initially (during the formation of Left shoulder) hectic trading volumes of buying & creating demand. Then the off-loading happens. When the buying shows weakness, again demand is created for some time. This repeated Buy-sell activity causes ups & downs in the pattern. Finally, at the Right Shoulder, it may be seen that gradually they are off-loading most of their stakes and moving away from the market. Summary is the entire shares have been Distributed (off-loaded) over a period of time. Hence it is known as Distribution Pattern.
