Complex Head-and-Shoulders Top

As of 08/20/2019

Indus: 25,962 -173.35 -0.7%

Trans: 10,006 -75.35 -0.7%

Utils: 834 -1.95 -0.2%

Nasdaq: 7,949 -54.25 -0.7%

S&P 500: 2,901 -23.14 -0.8%

YTD

+11.3%

+9.1%

+17.0%

+19.8%

+15.7%

Targets Overview: 08/15/2019

27,200 or 24,900 by 09/01/2019

10,700 or 9,550 by 09/01/2019

850 or 790 by 09/01/2019

8,200 or 7,400 by 09/01/2019

3,000 or 2,750 by 09/01/2019

Chart pattern indicator: Arrows

on 8/16/19

As of 08/20/2019

Indus: 25,962 -173.35 -0.7%

Trans: 10,006 -75.35 -0.7%

Utils: 834 -1.95 -0.2%

Nasdaq: 7,949 -54.25 -0.7%

S&P 500: 2,901 -23.14 -0.8%

YTD

+11.3%

+9.1%

+17.0%

+19.8%

+15.7%

Targets Overview: 08/15/2019

27,200 or 24,900 by 09/01/2019

10,700 or 9,550 by 09/01/2019

850 or 790 by 09/01/2019

8,200 or 7,400 by 09/01/2019

3,000 or 2,750 by 09/01/2019

Chart pattern indicator: Arrows

on 8/16/19

Bulkowski's Complex Head-and-Shoulders Top

For more information on this pattern, read Encyclopedia of Chart Patterns

Encyclopedia of Chart Patterns 2nd Edition book.

, pictured on the right. The chapter gives a complete review of the chart pattern, compared to what is described below.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

Complex Head-and-Shoulders Top: Important Bull Market Results

Overall performance rank (1 is best): 9 out of 53

Break even failure rate: 18%

Average decline: 17%

Pullback rate: 66%

Percentage meeting price target: 46%

The above numbers are based more than 600 perfect trades. See the glossary for definitions.

Complex Head-and-Shoulders Top: Identification Guidelines

Characteristic	Discussion
Price trend	Upward leading to the pattern.
Shape	A head-and-shoulders top with multiple shoulders or multiple heads, but rarely both.
Symmetry	The shoulders should peak near the same price, be nearly the same distance from the head, and look similar (both wide or both narrow peaks) compared to their mirror opposite.
Volume	Usually higher on the left side of the pattern.
Neckline	Joins the lowest armpits and is often nearly horizontal. Rarely does it slope steeply.
Confirmation	The pattern confirms as valid when price closes below an up-sloping neckline or below the right armpit when the neckline slopes downward.

Complex Head-and-Shoulders Top: Trading Tips

Trading Tactic	Explanation	The Measure Rule Inner Head & Shoulders
Measure rule	Compute the height from the highest head (A) to the neckline directly below (B) and then multiply it by the "percentage meeting price target" (see "Important Bull Market Results") before subtracting it from the breakout price (C). The breakout price is where price crosses an up-sloping neckline, or when the neckline slopes downward, use the right shoulder armpit. The figure to the right shows an example, but uses a head-and-shoulders top.
Price reversal	Price must have something to reverse, so if the rise leading to the pattern is small, expect a small decline.
Confirmation	Wait for confirmation before placing a trade.
Trends	A short-term rise leading to the pattern results in the best post breakout performance.
Price velocity	A high velocity rise leading to the pattern often results in a larger decline post breakout. The link to the left explores this.
Inner H&S	If the pattern shows an inner head-and-shoulders top, then trade it. The figure to the right shows an example.
Neckline	Patterns with near horizontal necklines perform best.
Yearly middle	Patterns in the lowest third of the yearly price range perform best (this may change with more study samples).
Volume trend	An upward volume trend suggests better post breakout performance. The link to the left defines this while this link explains performance.
Pullbacks	Pullbacks hurt post breakout performance. The link to the left defines terms while this link explains performance details.
Symmetry	Patterns with an extended right shoulder perform marginally better.

Complex Head-and-Shoulders Top: Example

The figure on the right shows an example of a complex head-and-shoulders top chart pattern.

This example has two left shoulders (LS), and two right shoulders (RS). The blue neckline is not very steep but if you use that as the standard breakout method, where price closes below a down-sloping neckline, it will be at a lower price than if you use the right shoulder armpit low (the dashed red line). The neckline, incidentally, joins the lowest low (armpit) to the left of the head with the lowest low (armpit) to the right of the head.

Notice how price at B returns to the launch point, A. This often occurs when price moves up quickly leading to the chart pattern -- a decline takes price nearly back to the staring price.

Complex Head-and-Shoulders Top: Other Examples