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Bixley
May 10, 2023 9:54 AM

DHI - Inverted H&S 

D.R. Horton, Inc.NYSE

Description

an idea showing inverted H&S
could also be called a cup and handle if you disregard the prior left shoulder
Bullish above currently
Hourly chart
Comments
jrothlander
You can sort of see a cup-and-handle and head-and-shoulder, but the points are a little off and I don't think it fits well.

I am pretty new to trend analysis and have only been researching it for the past few years. But it's my understand that you need the price to bounce at the right points for these patterns to be correctly applied and you don't want to just follow general trends that look similar to the pattern. For example, you want a trend line to be pretty accurate for the head-and-shoulders pattern. You can see this by using the TradingView tool for head-and-shoulder and try to draw it. It will not allow you to do so if the base trend line is not there, which for this one I don't think it is. I would suggest using that tool and playing with it a bit to see if the pattern applies. If it does, the price should hit around $150.

The way I understand it, the traditional model for the cup-and-handle should pull back to 50% of the value of the cup. Let's call the cup movement from $60 to $104. That would mean a total price movement of $44, or $22 at 50%. So we'd need the price to drop near $82 and rise again to $104 to complete the cup-and-handle, which I don't see here. I also do not see the head-and-shoulder pattern because there's no symmetry between the left and right shoulders that I can see in regards to the base trend line. It could be forming, but if so, the head is not yet complete and do not yet have a righrt shoulder.

However, there is a reverse cup-and-handle if you take your left-shoulder and head. That pattern works out because the price did in fact drop about 50%. However, applying that to the price movement would suggest a price drop to almost $20 per share. So I'd ignore that reverse cup-and-handle pattern because that is just not going to happen. Also, keep in mind that if the head-and-shoulder pattern is there with a haed to shoulder ratio of 50%, you actually have a reverse cup-and-handle followed by a cup-and-handle pattern one after the other. I guess the idea is that since it ends with a cup-and-handle, we ignore the revese cup-and-handle before it.

Just a few thoughts based on what I see.
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