The
head and shoulders pattern
is found in candlestick,
point and figure, and chart
patterns and is considered
one of the most reliable
reversal patterns.
The
price forms a high on column
one, followed by a period
of consolidation. A second
high is created followed
by another period of consolidation,
the right shoulder is then
formed followed by a sell
off. High volume should
be seen on the last downward
move.
Parralel
support and resistance lines
can be drawn as well as
a visible neckline.
The
height of the highest high
should give a projection
of the drop of the final
downward move.
Inverted
Head and Shoulders Pattern
The
inverted head and shoulders
pattern is found in candlestick,
point and figure, and chart
patterns and is considered
one of the most reliable
reversal patterns.
The
price forms a low on column
one, followed by a period
of consolidation. A second
low is created followed
by another period of consolidation,
the right shoulder is then
formed followed by a buy
signal as it crosses the
neckline.
Parralel
support and resistance lines
can be drawn as well as
a visible neckline.
The
height of the lowest low
should give a projection
of the strength of the upward
move.
Triple
Top
The
triple top is a variation
of the head and shoulders
pattern. This pattern consists
of three peaks of similar
height. After the third peak
is formed and the price movement
breaks the neckline, a bearish
signal is given. The expected
drop should be of similar
height as from the neckline
to the tops.
Triple
Bottom
The
triple bottom is a variation
of the inverted head and shoulders
pattern. This pattern consists
of three lows of similar height.
After the third low is formed
and the price movement breaks
the neckline, a bullish signal
is given. The expected rise
should be of similar height
as from the neckline to the
low.
Double
Top
The
double top is a variation
of the triple top pattern.
This pattern consists of two
peaks of similar height. After
the second peak is formed
and the price movement breaks
the neckline, a bearish signal
is given. The expected drop
should be of similar height
as from the neckline to the
tops. It is important to note
that before the price drop,
the trend line is broken.
Double
Bottom
The
double bottom is a variation
of the triple bottom pattern.
This pattern consists of two
lows of similar height. After
the second low is formed and
the price movement breaks
the neckline, a bullish signal
is given. The expected rise
should be of similar height
as from the neckline to the
tops. It is important to note
that before the breakout,
the trend line is broken.
Bearish
Rectangle Reversal
The
uptrend forms a clear period
of consolidation, the support
line is then broken on a heavy
volume day, it is at this
point where the bearish signal
occurs.
Bullish
Rectangle Reversal
The
downtrend forms a clear period
of consolidation, the resistance
line is then broken on a heavy
volume day, it is at this
point where the bullish signal
occurs.
Historical and current end-of-day data provided by Interactive Data Corp. and subject to terms of use.
Dow Jones Industrial Average is copyright Dow Jones & Company, Inc.
