How to identify Head & shoulders patterns on charts and take possible trading entries??
Head & Shoulders Pattern is a Bearish Reversal chart pattern usually identified in a primary downtrend or at the end of a primary uptrend. However, there are also some different interpretations of the chat patterns that can be analyzed in sideways trend and also sometimes used as a bearish continuation pattern in some cases.
- A Head and Shoulders reversal pattern forms after an uptrend.
- The pattern contains three successive peaks with the middle peak (head) being the highest and the two outside peaks (shoulders) being low and roughly equal.
- The head and shoulders reversal pattern is made up of a left shoulder, head, right shoulder, and neckline. Other parts playing a role in the pattern are volume, the breakout, price target, and support turned resistance.
- Identification of neckline support and volume confirmation on the break can be the most critical factors.
- Stop loss will be above the high of the Right Shoulder.
- The distance from the neckline to the top of the head will be the target.
The 3 possible entries in the head & shoulders pattern are shown above in the image.
- Aggressive entry to get a better Risk Reward after the trend line breakout’s retest
- Early entry before the neckline break
- Traditional entry after the breakout of the neckline, which also gives you the least reward among other entries but with greater confirmation.
𝗝𝗼𝗶𝗻 𝗼𝘂𝗿 𝘁𝗲𝗹𝗲𝗴𝗿𝗮𝗺 𝗰𝗵𝗮𝗻𝗻𝗲𝗹 𝘁𝗼 𝗹𝗲𝗮𝗿𝗻 𝘁𝗵𝗲 𝘀𝘁𝗼𝗰𝗸 𝗺𝗮𝗿𝗸𝗲𝘁 𝗯𝗮𝘀𝗶𝗰𝘀- 𝗙𝗶𝗻𝘄𝗶𝗻𝗴𝘀 𝗦𝘁𝗼𝗰𝗸 𝗧𝗿𝗮𝗱𝗶𝗻𝗴 𝗔𝗰𝗮𝗱𝗲𝗺𝘆~ 𝗙𝗿𝗲𝗲 𝗘𝗱𝘂𝗰𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗖𝗵𝗮𝗻𝗻𝗲𝗹:⬇️
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