As of 10/11/2019
  Indus: 26,817 +319.92 +1.2%  
  Trans: 10,292 +224.65 +2.2%  
  Utils: 867 -5.54 -0.6%  
  Nasdaq: 8,057 +106.26 +1.3%  
  S&P 500: 2,970 +32.14 +1.1%  
YTD
 +15.0%  
 +12.2%  
 +21.6%  
 +21.4%  
 +18.5%  
  Targets    Overview: 09/30/2019  
  Up arrow27,600 or 25,600 by 10/15/2019
  Up arrow11,100 or 9,700 by 10/15/2019
  Up arrow900 or 850 by 10/15/2019
  Up arrow8,300 or 7,700 by 10/15/2019
  Down arrow2,825 or 3,050 by 10/15/2019
As of 10/11/2019
  Indus: 26,817 +319.92 +1.2%  
  Trans: 10,292 +224.65 +2.2%  
  Utils: 867 -5.54 -0.6%  
  Nasdaq: 8,057 +106.26 +1.3%  
  S&P 500: 2,970 +32.14 +1.1%  
YTD
 +15.0%  
 +12.2%  
 +21.6%  
 +21.4%  
 +18.5%  
  Targets    Overview: 09/30/2019  
  Up arrow27,600 or 25,600 by 10/15/2019
  Up arrow11,100 or 9,700 by 10/15/2019
  Up arrow900 or 850 by 10/15/2019
  Up arrow8,300 or 7,700 by 10/15/2019
  Down arrow2,825 or 3,050 by 10/15/2019

Bulkowski's Head-and-Shoulders Bottoms

 

Statistics updated on 11/14/2018. Rank updated on 7/26/19.

For more information on this pattern, read Encyclopedia of Chart PatternsEncyclopedia of Chart Patterns book., pictured on the right.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

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Head-and-shoulders bottoms are reliable chart patterns that sport a low failure rate and good average rise.

Head-and-shoulders bottom chart pattern
Head-and-Shoulders Bottom

 

Head-and-Shoulders Bottom: Important Bull Market Results

Overall performance rank (1 is best): 17 out of 56
Break even failure rate: 10%
Average rise: 45%
Throwback rate: 64%
Percentage meeting price target: 71%

The above numbers are based on 3,115 perfect trades. See the glossary for definitions.

Head-and-Shoulders Bottom: Identification Guidelines

CharacteristicDiscussion
Price trendDownward leading to the pattern
ShapeA 3-valley pattern with the middle valley below the others. The pattern should look like an inverted person's head and shoulders, proportional, and not lopsided.
SymmetryThe two shoulders should bottom near the same price, be nearly the same distance from the head, and look similar (both wide or both narrow).
VolumeHighest on the left shoulder or head, diminished on the right shoulder. Trends downward 65% of the time.
NecklineJoins the two armpits.
ConfirmationThe pattern confirms as a valid one when price closes above a down-sloping neckline or above the right armpit when the neckline slopes upward.

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Head-and-Shoulders Bottom: Trading Tips

Trading TacticExplanation Head-and-shoulders chart pattern measure rule
The Measure Rule

Head-and-shoulders chart pattern measure rule

Shoulder Valley

Measure ruleCompute the height from the head low (A) to the neckline directly above (B) and then multiply it by the "percentage meeting price target" (see above). Add it to the breakout price (C). The breakout price is where price crosses a down-sloping neckline, or when the neckline slopes upward, use the peak of the right shoulder armpit. See the Measure Rule figure to the right.
Price reversalPrice must have something to reverse, so if the decline leading to the pattern is small, expect a small rise.
ConfirmationWait for confirmation before placing a trade. In the Measure Rule figure to the right, confirmation occurs at C.
TrendsA short-term drop (37 days or less) leading to the pattern results in the best postbreakout performance.
NecklinePatterns with down-sloping necklines perform marginally better. The Measure Rule figure to the right shows an example of a head-and-shoulders bottom with a down-sloping neckline.
ShoulderA higher left shoulder valley when compared to the right shoulder valley results in worse postbreakout performance. The Shoulder Valley figure to the right shows this comparison.
ThrowbacksThrowbacks hurt postbreakout performance.

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Head-and-Shoulders Bottom: Example

Head-and-shoulders chart pattern example

The above figure shows an example of a Head-and-shoulders bottom chart pattern. The left shoulder (LS), head, and right shoulder (RS) form three consecutive valleys. Shoulder distance from the head is similar as is the price at which the two shoulders bottom. A blue neckline joins armpits A and (B). When price closes above the neckline at C, it confirms the head-and-shoulders bottom chart pattern as a valid one.

-- Thomas Bulkowski

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Head-and-Shoulders Bottom: Other Examples

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:      New                  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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