Chart Pattern Head And Shoulders
Please note that the information about expected price targets provided by Auto Chart Patterns isn't a recommendation for what you should personally do. Do not take this data as investment advice. It should only be used for education and research. As with any trade, always look first and then leap.
Head and Shoulders is a reversal pattern formed by three consecutive highs and two intermediate lows. The first and third peaks are called shoulders. They are located approximately at the same level below the second – the head. Also, important is the line drawn along the intermediate lows – the neckline. The pattern is considered completed only when the price, having formed the right shoulder, falls below the neckline. It is expected that further price movement down will be approximately equal to the height of the head.
The indicator searches for patterns on the last 600 bars. The pattern consists of lines indicating price movements (Price Line) and neck lines (Neck Line). The neck line is drawn through intermediate lows and is limited by intersections with price lines. The start and end points of each price line, except for the last one (point 7), are located in 5/5 pivots. Point 7 is located at the intersection of the last price line with the neck line. In the In Progress mode, the indicator looks for not only formed, but also emerging patterns. The right shoulder of such a pattern may not be in the pivot, and the price lines forming it will be dotted.
The pattern is considered formed when, after the formation of the right shoulder, the price (close) falls below the neckline. The dotted horizontal line that ends with the Target label indicates the expected price level after the pattern has formed. As new bars appear, the line extends to the right until the last bar, until the pattern status changes from Awaiting to another. The label tooltip shows the price and the current status of the pattern. When the status changes, the color of the label also changes. There are 4 statuses in total:
- Awaiting. The price did not reach the expected level and did not go above the right shoulder.
- Reached. The price reached the expected level.
- Failed. The price did not reach the expected level and went above the right shoulder.
- Indefinable. The indicator cannot unambiguously determine the status of the patterns.
If the indicator finds two intersecting patterns, then preference is given to the one whose status is Awaiting. If the status of the intersecting patterns is Failed or Reached or the status of both is Awaiting, then the most obvious pattern will be displayed on the chart. A pattern with the Indefinable status is deleted if it intersects with a pattern that has a different status.
- New Pattern. It is triggered when a new pattern appears on the chart. A pattern is considered new if it has a different position of the left shoulder, head, or one of the intermediate minima.
- Pattern Formed. It is triggered when, after the appearance of the right shoulder, a bar appears that has closed below the neckline.
- Patterns - Defines which pattern will be drawn depending on its status. Possible values: All, Awaiting and Reached, Only Awaiting, Last Awaiting. If Last Awaiting is selected, only one pattern with the Awaiting status will be displayed, the first point of which is located to the right of all the others.
- Price Targets - Defines which price targets will be drawn depending status of the pattern. Possible values: All, Only Awaiting, Awaiting and Reached, None.
- Trend Height – Sets the required height of the trend preceding the pattern relative to the height of the head. The height of the head is calculated as the difference between the price value of the pivot, in which the head is located, and the neck lines on the same bar. Percent value.
- In Progress – Search for patterns that have not been fully formed yet.