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the interpretation and application of price action concepts

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HEAD & SHOULDERS PRICE PATTERN


more...Reverse Head and Shoulders   112303  111603  102303  092503  081403  0808/081303  0808/081303  031203   120602   102302  060104


I have been trading Head and Shoulder patterns for years. Many are not text book H&S patterns. I pay no attention to volume. I will trade a H&S at bottom range area and a reverse H&S and top range area, non-textbook. Even the formation of shoulder size and relationship to head I am very liberal. So when I say Head and Shoulder I mean NQoos Head and Shoulder pattern. I have received many emails and posts on yahoo groups telling me my pattern is not a Head and Shoulder. Ok, I agree perhaps some are different from traditional definitions Those that write books on technical analysis have their definitions. I massage those definitions and create my definitions.

My philosophy is simple. I am measuring swings and projecting measured moves. The price energy above the neck with be balanced with price energy below the neck. 

 

 

H&S patterns give  3 types of entry signals. 

1- Anticipatory. in the area of the 2nd shoulder high for as regular H&S, low of a shoulder for a rev H&S. For this entry, I will find with a variation of price action techniques. It could be a pullback and touch of the descending tops trendline from the head which is forming a mini bear flag or a pullback to the sell zone aka Floor Trader Method Often this is a MOF or slingshot . They all say the same thing. So much of trading setups are intertwined.

2- Momentum. At the break of the neckline. That means at the break. If you hesitate waiting  to see if it is going to work out then your entry is later and you will have to hold through more of a pullback if price retests the neckline. This is where many say bye bye. They get in late get stopped on pullback then say "if only I held it"

3- Retracement/ Retest of neckline after break of neckline price comes back. But sometimes price doesn't come back so I take the break or before that. For some the tendency is not to take break and wait to see if it will work. Well, if price only moves 2 pts from initial break of neckline then retraces to neck and does not reverse again into trend they have a loser while I have a breakeven or smaller loser from a neckline entry. Often if price moves +2 from initial neck break I will take a partial then add back at the neck retest. 

I like to enter at 1 and 2 and if it comes back and I have taken partial profit again at 3.

Once in a trade on ES my target is 2 points usually for 1st part of trade. So if target is 8 points away I will take partial profit at 2 points. I am unconcerned if it is a textbook H&S. I am looking for a $100/contract partial trade which may then go further, hopefully to target. Experience with this setup tells me it is profitable. While some may wait for the textbook H&S I am trading and taking profit. If the trade fails and comes short of target fine. I still have partial profits. I always give thanks after profit as well as loss knowing in the long run I am  a winner.

 

080803 H&S regular and inverted click chart to enlarge
 
080803 same day a bit later. No longer a H&S we just take out the low for a 2B entry that if price can get to trigger line  that is a new trigger for a Double Top/Bottom Projection technique a $1250 move. That's what happened.  click chart to enlarge
 
102303 Head and Shoulders with amputated shoulders. 

Lets see if it makes target and becomes a reversal trade like the last one that picked the HOD on 102003 a few days back, the top of the current plunge.  click chart to enlarge

click chart to enlarge
 
120602 this chart and next basic H&S pattern. This one I trade twice . Once at neckline for partial and again at neckline for more partials and finally target.  click chart to enlarge
 
120602 Continuation of above chart. This was fun. Posted this live see the clocks.   click chart to enlarge

 
102302 NQoos Rev H&S. Complex variety.  click chart to enlarge
 
 
 

 

expect miracles, they are everywhere.............. God is good all the time

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