Trade the Head and Shoulders Pattern Print
Monday, 02 November 2009 18:21

The Head and Shoulders pattern consists of four distinct parts: The left shoulder, the head, the right shoulder, and the neckline. Each of these four must be present for the formation to exist. Furthermore, the volume pattern must also meet strict requirements.

Volume must show a peak on the left shoulder, a lower peak at the head, and then an even lower level at the right shoulder. One simple technique to determine whether the pattern fits is to draw a downtrend line on the volume chart. If the price pattern and volume line match, then you have identified a head and shoulders formation.

Have a look at this video made by InformedTrades.com, where David explains extensively this pattern.

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