samitrading

H&S Pattern can be either horizontal or sloping up/down neckline

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SP:SPX   S&P 500 Index


( """ The pattern consists of a head (the second and the highest peak) and 2 shoulders (lower peaks) and a neckline (the line which connects the lowest points of the two troughs and represents a support level ). The neckline may be either horizontal or sloping up/down. The signal is more reliable when the slope is down rather than up.

The pattern is confirmed when the prices broke below the neckline after forming the second shoulder. Once it happens, the currency pair should start a downtrend. So, a sell order is put below the neckline. To get the target measure the distance between the highest point of the head and the neckline. This distance is approximately how far the price will move after it breaks the neckline.

source FBS


Comment: Characteristics

1/ Most of the time Head and Shoulders are not perfectly shaped. This formation is slightly tilted upward or downward.

2/One shoulder may appear to droop.

3/ On many chart patterns, any one of the two shoulders may appear broader than the other which is caused by the time involved in the formation of the valleys.

4/ ((((((((((((The neckline may not be perfectly horizontal; it may be ascending or descending. ))))))))))

5/ If the neckline is ascending then to qualify as a Head and Shoulders formation the (((((lowest point of the right shoulder must be noticeably lower than the peak of the left shoulder.)))))))))))