Complex Head-and-Shoulders Bottom

As of 09/22/2023

Indus: 33,964 -106.58 -0.3%

Trans: 14,988 -70.12 -0.5%

Utils: 871 -3.09 -0.4%

Nasdaq: 13,212 -12.17 -0.1%

S&P 500: 4,320 -9.94 -0.2%

YTD

+2.5%

+11.9%

-9.9%

+26.2%

+12.5%

Targets Overview: 09/15/2023

36,250 or 33,850 by 10/01/2023

15,900 or 14,800 by 10/01/2023

900 or 850 by 10/01/2023

14,400 or 13,000 by 10/01/2023

4,575 or 4,300 by 10/01/2023

Chart Pattern Indicator:

on 9/15/23

As of 09/22/2023

Indus: 33,964 -106.58 -0.3%

Trans: 14,988 -70.12 -0.5%

Utils: 871 -3.09 -0.4%

Nasdaq: 13,212 -12.17 -0.1%

S&P 500: 4,320 -9.94 -0.2%

YTD

+2.5%

+11.9%

-9.9%

+26.2%

+12.5%

Targets Overview: 09/15/2023

36,250 or 33,850 by 10/01/2023

15,900 or 14,800 by 10/01/2023

900 or 850 by 10/01/2023

14,400 or 13,000 by 10/01/2023

4,575 or 4,300 by 10/01/2023

Chart Pattern Indicator:

on 9/15/23

Bulkowski on Complex Head-and-Shoulders Bottoms

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

, pictured on the right, pages 390 to 404. That 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.

A complex head-and-shoulders bottom is a chart pattern that looks like an inverted head-and-shoulders but with multiple heads, multiple shoulders, or sometimes both. The break even failure rate is low and the performance is good from this chart pattern.

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

The above numbers are based on 933 perfect trades. See the glossary for definitions.

Complex Head-and-Shoulders Bottom: Identification Guidelines

Characteristic	Discussion
Price trend	Downward leading to the pattern.
Shape	A head-and-shoulders bottom with multiple shoulders or multiple heads but rarely both.
Symmetry	The shoulders should bottom near the same price, be nearly the same distance from the head, and look similar to their mirror opposite.
Volume trend	Usually higher on the left side of the pattern. Trends downward 65% of the time. The link to the left gives an example and this link discusses performance.
Neckline	Joins the highest armpits.
Confirmation	The pattern confirms as a valid one when price closes above a down-sloping trendline or above the right armpit when the neckline slopes upward.

Complex Head-and-Shoulders Bottom: Trading Tips

Trading Tactic	Explanation	The Measure Rule
Measure rule	Compute the height from the head low (A) to the neckline (B) directly above then multiply it by the 'percentage meeting price target (see above "Important Bull Market Results").' Add the result to the breakout price (C). The breakout price is where price crosses a down-sloping neckline, or when the neckline slopes upward, use the peak of the right shoulder armpit. The figure to the right shows an example for a regular head-and-shoulders bottom.
Price reversal	Price must have something to reverse, so if the decline leading to the pattern is small, expect a small rise.
Confirmation	Wait for confirmation (breakout) before placing a trade. I show point C as the confirmation point in the figure.
Neckline	Patterns with down-sloping necklines perform better. The green neckline on the chart to the upper right shows an example (Measure Rule figure).
Yearly middle	Patterns having breakouts in the middle third of the yearly price range perform best.
Volume trend	An upward volume trend suggests better post breakout performance.
Throwbacks	Throwbacks hurt post breakout performance as the study discusses.
Symmetry	Symmetrical looking patterns perform best (that is, the two outermost shoulders are the same or nearly the same distance from the head).

Complex Head-and-Shoulders Bottom: Example

The above figure shows an example of a complex head-and-shoulders bottom chart pattern. This complex head-and-shoulders has a dual head. Additional shoulders too far away to really be part of the chart pattern are located at A and B.

Price breaks out in August but quickly throws back (B). A throwback occurs 66% of the time in a bull market.

Bulkowski on Complex Head-and-Shoulders Bottoms