Head and shoulder morphology

Head and shoulder form is the most classic reversal form, mainly divided into head and shoulder top and head and shoulder bottom two types

Head and shoulder top refers to the end of the upward trend, the price of three high fall to form three obvious peaks. The middle high is higher than the other two high points and is called the head; the left and right two relatively low high points are called shoulders.

After the first appearance of the head and shoulders, the most critical position is the neck line. Connect the low point between the left shoulder, the right shoulder and the head, and draw a straight line, which is the neck line at the top of the head and shoulders. If the price effectively falls below the neckline, the head and shoulders are established.

Trading Practice

operationally, the price of effective breakdown of the neck line is a sell signal, the market will have a certain decline. However, in general, many parties will counterattack to retest the pressure of the neck line, if it fails again, then the neck line pressure will be consolidated and confirmed, you can further increase the position, not entered the short will also establish a position here. When the neckline falls below, the level to which the price will fall can be predicted based on the pattern's "least drop" measure. This is measured by drawing a vertical straight line from the highest point of the head to the neckline, and then measuring the same length downward, starting at the point where the right shoulder breaks the neckline, from which the measured price is the smallest amount that will fall.

Head and shoulder soles it's the opposite of the head and shoulders and is a reliable time to buy. The composition and analysis of this form is similar to that of the head and shoulders, but in the opposite direction. For example, rising changes to falling, highs to lows, and support to pressure.

Trading Practice

when investors see the shape of the bottom of the head and shoulders, they should think that this is a signal of bottom recovery. At this time, they can no longer continue to be bearish, but should be ready to enter the market at any time. Consider buying some once the price breaks the neckline, which is often referred to as the first buy point. If the price breaks through the neckline and then draws back and rises again near the neckline, you can add a position to buy, which is often referred to as a second buy point.