The more developed a Head and Shoulders pattern is, the less risky it is to trade it over time. Right now, we don't know if this really is a H&S . But if we see strong resistance at the red line, then it could be a signal that the price is going to hit the neck line and yellow and then go down to the blue line, completing the H&S pattern around $2400. From there it may be safe to go long, if you're a day trader. However, as I have said before, you can't call it a Head and Shoulders pattern because it hasn't happened yet. It's very risky to make trading decisions based off incomplete patterns.
If it is a true H&S , then figure out the price at the head minus the price at the neck line. Then subtract that number from the neckline, and the final target should be within that area. However charts are like snowflakes, they never look exactly the same, so be conservative with your targets just in case.
The price closing above the red line will render all of this useless, so don't make a decision until then.
If it is a true H&S , then figure out the price at the head minus the price at the neck line. Then subtract that number from the neckline, and the final target should be within that area. However charts are like snowflakes, they never look exactly the same, so be conservative with your targets just in case.
The price closing above the red line will render all of this useless, so don't make a decision until then.