Head & Shoulders

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APPLICATION

The Head & Shoulders drawing tool allows users to visually identify potential Head & Shoulder chart patterns.

The Head & Shoulders pattern is a formation which consists of three distinct sections or shapes; a left shoulder, a head, and a right shoulder. There is also a horizontal line which creates the base for the three shapes. The line is known as the neckline. This pattern can be both bullish as well as bearish. For the example below, we will list the conditions of the Head & Shoulders Top which is the bearish setup. For the Head & Shoulders Bottom (bullish setup), the inverse of all of the following conditions is true.


Head & Shoulders Top (Bearish)

  1. The left shoulder forms at the end of an extensive advance in price. The move generally occurs during a period of high volume. After the move up (peak), price declines to an extent to form a valley.
  2. From the valley formed at the end of the left shoulder's formation, price then rises once again to a level that is higher than the peak of the left shoulder. This move is accompanied by either normal or high volume. Then, just like the left shoulder, price then reacts and falls again on low volume. The valley should be right around the same level as the previous valley formed at the end of the formation of the left shoulder.
  3. The right shoulder then begins formation. The right shoulder in general is formed on lower volume than both the left shoulder and the head. The key aspect of the right shoulder is that its peak must be lower than the peak of the head.
  4. Once both shoulders and the head are formed, the pattern is essentially complete. For the formation to be valid, a horizontal line known as the neckline should be able to cross through all three sections with the two valleys between the head and both shoulders resting on the line.
  5. Now that the Head & Shoulders pattern has been formed, all that's left is price confirmation. If price proceeds to fall below the neckline, this is considered to be confirmation of the bearish setup.


HOW TO USE IN TRADINGVIEW

Style

H&SStyle.PNG

Border

Can change the color of the border as well as its thickness.

Text Options

Can change the text color, font type and font size. You can also choose to bold and/or italicize the text.

Coordinates

H&SCoordinates.PNG

Price 1

Allows for the precise placement of the pattern's first point (Price 1) using a bar number and price.

Price 2

Allows for the precise placement of the pattern's second point (Price 2) using a bar number and price.

Price 3

Allows for the precise placement of the pattern's third point (Price 3) using a bar number and price.

Price 4

Allows for the precise placement of the pattern's fourth point (Price 4) using a bar number and price.

Price 5

Allows for the precise placement of the pattern's fifth point (Price 5) using a bar number and price.