As of 10/03/2024
Indus: 42,012 -184.93 -0.4%
Trans: 15,745 -226.81 -1.4%
Utils: 1,058 -6.74 -0.6%
Nasdaq: 17,918 -6.64 0.0%
S&P 500: 5,700 -9.60 -0.2%
|
YTD
+11.5%
-1.0%
+20.0%
+19.4%
+19.5%
|
 43,500 or 41,600 by 10/15/202416,800 or 15,700 by 10/15/20241,125 or 1,025 by 10/15/202419,000 or 17,600 by 10/15/20245,900 or 5,600 by 10/15/2024 |
As of 10/03/2024
Indus: 42,012 -184.93 -0.4%
Trans: 15,745 -226.81 -1.4%
Utils: 1,058 -6.74 -0.6%
Nasdaq: 17,918 -6.64 0.0%
S&P 500: 5,700 -9.60 -0.2%
|
YTD
+11.5%
-1.0%
+20.0%
+19.4%
+19.5%
| |
|
43,500 or 41,600 by 10/15/202416,800 or 15,700 by 10/15/20241,125 or 1,025 by 10/15/202419,000 or 17,600 by 10/15/20245,900 or 5,600 by 10/15/2024 | ||
Statistics updated on 8/26/2020.
For more information on this pattern, read
Encyclopedia of Chart Patterns
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The above numbers are based more than 650 perfect trades. See the glossary for definitions.
| 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. |
Consult the associated figure on the right.
| 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). | |
| 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. |
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.
-- Thomas Bulkowski
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