How it Happensh - Head and Shoulders
How to trade Uptrend, How to trade down trend, sideways, sell on the news, How to draw trendline, Head and Shoulder Pattern, Left Shoulder, Right Shoulder
Course: [ Profitable Chart Patterns in Stock markets : Chapter 4. Head and Shoulders Pattern ]
The Head and Shoulders describes what occurs when buyers meet sellers under certain circumstances. Let us try to depict, in the form of a diagram, just how different groups of investors react psychologically —and with their money—during the different phases of a Head and Shoulders, which we might call a drama in three acts.
HOW IT HAPPENS
Like any
other chart pattern, the Head and Shoulders describes what occurs when buyers
meet sellers under certain circumstances. Let us try to depict, in the form of
a diagram, just how different groups of investors react psychologically —and
with their money—during the different phases of a Head and Shoulders, which we
might call a drama in three acts. Our cast of characters is as follows:
|
GROUP A |
Persons
who bought stock before or during an uptrend, and are now ready to sell and
take their profits. |
|
GROUP B |
Persons
who missed the uptrend, but are now ready to buy the stock at "bargain”
prices during a technical reaction. |
|
GROUP C |
Persons
who, like Group B, have missed the uptrend and want to buy on the reaction,
but wait too long and "reach” for the market on its rally to new
highs. |
|
GROUP D |
Persons
who have missed the uptrend and the first reaction, but seize on the second
reaction as a "last chance” to get that bargain price. |
|
GROUP E |
Same
characters as in Group C, except that they are now would-be sellers. Having
seen their new purchases turn into paper losses, they have now decided,
"If the price gets back up to where I can break even, or take just a
small loss, I’ll sell.” |
|
GROUP F |
Remnants
of Group A, plus a smattering of trades in each of the other groups, who now
all show losses on their purchases. |
Here is
how the drama develops, in diagram form:
Profitable Chart Patterns in Stock markets : Chapter 4. Head and Shoulders Pattern : Tag: Candlestick Pattern Trading, Stock Markets : How to trade Uptrend, How to trade down trend, sideways, sell on the news, How to draw trendline, Head and Shoulder Pattern, Left Shoulder, Right Shoulder - How it Happensh - Head and Shoulders
