>>> Why Head and Shoulders pattern are seen everywhere ….. and it seems they fail
-Head and Shoulders (h&s) and its inverse version are reversal patterns favorite to traders, this pattern rated among the most reliable or even the most reliable patterns in documents and by TA authors including Bulkowski and others, it is told it is reliable more than 80 percent (samuraitradingacadem...ice-action-patterns/) and (thepatternsite.com/hst.html)
-But wait a minute, here in tradingview we encounter many failed h&s and inverse h&s patterns
-I find the problem that causes this paradox; it lies in definition of h&s or more exactly in not to notice to it; here it is: h&s is a complete pattern when its right shoulder is complete. Otherwise it is not h&s !
This is the source of confusion regarding feeling of their failure rate despite high reliability rate in TA documents as the most reliable pattern.
-Head and Shoulders pattern is a bit different from other patterns, take a wedge when upper and lower trend lines of a wedge shaped (by 2 or 3 point of price action contact with each trend line) the wedge is complete and based on its reliability you may expect for price break some time ahead. But in h&s, after left shoulder and head plus a bit of right shoulder take formation many traders including me and newbie or even experienced ones think about a h&s and calling a trade, not only there is no guarantee the right shoulder to be completed but also there is no guarantee that it be successful and break out to target.
-more important is “the right shoulder”, it itself needs other means (such as indicators, patterns, market sentiment etc) to signal its willingness to complete and this is a different story from h&s as a whole, and this make it unique to pattern like wedge triangle etc.
*** In summary a head and shoulders or its inverse version pattern is complete and “is” a h&s when its right shoulder is complete too, otherwise it is NOT a h&s pattern. This is the source of confusion regarding apparent failure rate in actual trading despite high reliability rate of h&s in TA documents as the most reliable pattern.
Remember:
h&s is a complete pattern when its right shoulder is complete. Otherwise it is NOT h&s ! this is not automatic.
right shoulder completion may be narrated as a different story.
*** Current BTC price action:
Regarding current BTC price action an inverse head and shoulder is in formation with an incomplete right shoulder.
But is there any line of reasoning for possibility of completion of right shoulder? Yes, studying anatomy of right shoulder reveals: a bullish ascending triangle (sample ref tradingview.com/chart/NZDJPY/ej9xL7m5-ASCENDING-TRIANGLE-TREND-REVERSAL/) is formed (yes the pattern is complete) as the price action holds the support level of 6128 in past two days causing the lower trendline to be intact, and the right shoulder is part of this structure.
This with a good chance could lead to completion of right shoulder and collectively pointing to ultimate target of 7700-7800
*** Hey, if you like this post then "Like" it now !
-Head and Shoulders (h&s) and its inverse version are reversal patterns favorite to traders, this pattern rated among the most reliable or even the most reliable patterns in documents and by TA authors including Bulkowski and others, it is told it is reliable more than 80 percent (samuraitradingacadem...ice-action-patterns/) and (thepatternsite.com/hst.html)
-But wait a minute, here in tradingview we encounter many failed h&s and inverse h&s patterns
-I find the problem that causes this paradox; it lies in definition of h&s or more exactly in not to notice to it; here it is: h&s is a complete pattern when its right shoulder is complete. Otherwise it is not h&s !
This is the source of confusion regarding feeling of their failure rate despite high reliability rate in TA documents as the most reliable pattern.
-Head and Shoulders pattern is a bit different from other patterns, take a wedge when upper and lower trend lines of a wedge shaped (by 2 or 3 point of price action contact with each trend line) the wedge is complete and based on its reliability you may expect for price break some time ahead. But in h&s, after left shoulder and head plus a bit of right shoulder take formation many traders including me and newbie or even experienced ones think about a h&s and calling a trade, not only there is no guarantee the right shoulder to be completed but also there is no guarantee that it be successful and break out to target.
-more important is “the right shoulder”, it itself needs other means (such as indicators, patterns, market sentiment etc) to signal its willingness to complete and this is a different story from h&s as a whole, and this make it unique to pattern like wedge triangle etc.
*** In summary a head and shoulders or its inverse version pattern is complete and “is” a h&s when its right shoulder is complete too, otherwise it is NOT a h&s pattern. This is the source of confusion regarding apparent failure rate in actual trading despite high reliability rate of h&s in TA documents as the most reliable pattern.
Remember:
h&s is a complete pattern when its right shoulder is complete. Otherwise it is NOT h&s ! this is not automatic.
right shoulder completion may be narrated as a different story.
*** Current BTC price action:
Regarding current BTC price action an inverse head and shoulder is in formation with an incomplete right shoulder.
But is there any line of reasoning for possibility of completion of right shoulder? Yes, studying anatomy of right shoulder reveals: a bullish ascending triangle (sample ref tradingview.com/chart/NZDJPY/ej9xL7m5-ASCENDING-TRIANGLE-TREND-REVERSAL/) is formed (yes the pattern is complete) as the price action holds the support level of 6128 in past two days causing the lower trendline to be intact, and the right shoulder is part of this structure.
This with a good chance could lead to completion of right shoulder and collectively pointing to ultimate target of 7700-7800
*** Hey, if you like this post then "Like" it now !
Comment:
As expected the price action broke out 6380 resistance line and on the way to 6800 and before that MA 50 Daily , if conquer 6900 then the inv. h&s is complete ready to launch to 7800 target. But I think passing 6800 still could be somehow hard.
Comment:
please note: in continuation of or educational discussion of right shoulder of h&s, Ok price reached to 6755 and now consolidating around 6700, you can see here that the neckline (peak) is on 6850 line, very close to our current price action BUT we can not still assume inv. h&s is complete to look for its reliable jump altitude !
Because right shoulder still is not complete, price action should be over neckline (say 6900 for instance) sustainable to think that inv. h&s is complete and ready to launch.
So still struggling to complete the right shoulder AND the whole inv. h&s
Because right shoulder still is not complete, price action should be over neckline (say 6900 for instance) sustainable to think that inv. h&s is complete and ready to launch.
So still struggling to complete the right shoulder AND the whole inv. h&s
Comment:
Further you can see above, btc has to fight MA 50 daily in same level too.
Trade active:
Price action fired btc to 7500 range yesterday after breaking resistances, the inv. h&s completed at 6850 and the target of the inv.h&s is around 7700-7800 as stated before.
now it is just below MA 100 daily as a resistance level, it seems there is still momentum and with in a few days it can reach to destination, otherwise a correction needed to resume uptrend. I think still it can keep going up at this time.
now it is just below MA 100 daily as a resistance level, it seems there is still momentum and with in a few days it can reach to destination, otherwise a correction needed to resume uptrend. I think still it can keep going up at this time.
for now the progress seems cautious but steady.