[EDU] Trading the Chart pattern Series

Trading the Chart pattern
Basics and Advanced Concepts

Anatomy of Head and Shoulders

Head and shoulder could possibly be one of the most common chart pattern we see on the chart. So what makes up this pattern?
They are:

1. Left Shoulder:
> The left shoulder forms as the price initially rises and then experiences a pullback. This creates the left peak of the pattern.
> The pullback is typically less severe than the subsequent pullback after the head is formed.
2. Head:
> The head is formed when the price makes a higher peak than the left shoulder, indicating a strong upward movement.
> The head is the highest point in the pattern and is often characterized by increased trading volume.
3. Right Shoulder:
> Following the formation of the head, there is another pullback in price, creating the right shoulder.
> Similar to the left shoulder, the right shoulder is usually lower than the head and is accompanied by a decrease in trading volume.
4. Neckline:
> The neckline is a horizontal line that connects the lows of the left shoulder, head, and right shoulder.
> The neckline serves as a support level, and a significant break below this line is considered a confirmation of the pattern.

This is Shown in Figure 1

Advanced Concept
Of course, the world is not Perfect, and so is the financial market. "textbook" head and shoulder patterns would be a small fraction of the head and shoulders formed in the market. Therefore, we should also be aware of "catching" these other variants!

Complex head and shoulder
Figure 2
> could be one that has more than 1 left shoulder.
> Right shoulder made a new Lower Low, tell tale sign this uptrend is weakening

Extended head and shoulder
Figure 3
> the left and right shoulder showed extended stretch in terms of duration but still it is a head and shoulder in nature
> at the same time, this pattern also brings out to yet another variation, head and shoulder no necessarily is a reversal pattern. In this case it is a trend continuation pattern!(if you didnt realize that)
:)

Head and shoulders pattern as continuation Pattern

Figure 4
> over here we have a trend continuation pattern of head and shoulder
> 2nd, it has a slanted neckline
> other than that it is pretty much a classic head and shoulder.

Hope you all learn something from this article!
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