HS (Head and Shoulder)

By Lawrence

Head and Shoulder is a classic chart pattern that has been used abusively by many people or amateur chartists. There is only one form of HS that has statistical significance. Left shoulder is a swing high coming off an uptrend. After a pullback the market resume its rally to a new high yet stalled at least as quickly as it rise, to the low established during the pullback from left shoulder. Then one more rally attempt that failed to take out the left shoulder peak, resulting in a drop that break the horizontal neckline established from the 2 previous swing lows. The target for the selloff is 100% downside range expansion. The formation is manifestation of STOPD on markets where the major players need a prolonged period of time to unload their inventories.


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