Head-and-Shoulders Tops

As of 02/27/2020

Indus: 25,767 -1,190.95 -4.4%

Trans: 9,484 -356.45 -3.6%

Utils: 865 -41.50 -4.6%

Nasdaq: 8,566 -414.29 -4.6%

S&P 500: 2,979 -137.63 -4.4%

YTD

-9.7%

-13.0%

-1.6%

-4.5%

-7.8%

Targets Overview: 02/14/2020

27,300 or 25,300 by 03/15/2020

10,200 or 8,800 by 03/15/2020

925 or 840 by 03/15/2020

9,200 or 8,300 by 03/15/2020

3,150 or 2,900 by 03/15/2020

CPI (updated daily): Arrows

on 2/19/20

As of 02/27/2020

Indus: 25,767 -1,190.95 -4.4%

Trans: 9,484 -356.45 -3.6%

Utils: 865 -41.50 -4.6%

Nasdaq: 8,566 -414.29 -4.6%

S&P 500: 2,979 -137.63 -4.4%

YTD

-9.7%

-13.0%

-1.6%

-4.5%

-7.8%

Targets Overview: 02/14/2020

27,300 or 25,300 by 03/15/2020

10,200 or 8,800 by 03/15/2020

925 or 840 by 03/15/2020

9,200 or 8,300 by 03/15/2020

3,150 or 2,900 by 03/15/2020

CPI (updated daily): Arrows

on 2/19/20

Bulkowski's Head-and-Shoulders Tops

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Head-and-Shoulders Top: Important Bull Market Results

Overall performance rank (1 is best): 19 out of 53

Break even failure rate: 19%

Average decline: 16%

Pullback rate: 68%

Percentage meeting price target: 51%

The above numbers are based on more than 2,800 perfect trades. See the glossary for definitions.

Head-and-Shoulder Top: Identification Guidelines

Characteristic	Discussion
Price trend	Upward leading to the pattern
Shape	Looks like a head perched atop two shoulders. A 3-peak pattern with the middle peak above the others. The pattern should look like a person's head and shoulders, proportional, and not lopsided.
Symmetry	The two shoulders should peak near the same price, be nearly the same distance from the head, and look similar (both wide or both narrow peaks).
Volume	Highest on the left shoulder followed by the head. Trends downward 61% of the time.
Neckline	Joins the two armpits.
Confirmation	The pattern confirms as a valid one when price closes below an up-sloping neckline or below the right armpit when the neckline slopes downward.

Head-and-Shoulders Top: Trading Tips

Trading Tactic	Explanation	The Measure Rule
Measure rule	Compute the height from the head (A in the Measure Rule figure to the right) to the neckline directly below (B) then multiply it by the above 'percentage meeting price target.' Subtract the result from the breakout price (C). The breakout price is where price crosses an up-sloping neckline, or when the neckline slopes downward, use the right shoulder armpit.
Price reversal	Price must have something to reverse, so if the rise leading to the pattern is small, expect a small decline.
Confirmation	Wait for confirmation before placing a trade.
Trends	A short-term rise leading to the pattern results in the best post breakout performance.
Velocity	A high velocity rise leading to the pattern often results in a larger decline post breakout.
Yearly high	Patterns within a third of the yearly high perform worst, but the differences are slight.
Pullbacks	Pullbacks hurt post breakout performance.

Head-and-Shoulders Top: Example

The above figure shows an example of a Head-and-shoulders top chart pattern. The left shoulder (LS) appears above the right shoulder (RS). But, the two shoulders appear symmetrical about the head. A neckline shown in blue, joins the two armpits. Where price closes below the neckline, a breakout occurs and it also confirms the chart pattern as being a valid head-and-shoulders top. A pullback occurs in this example just to make trading interesting.

Head-and-Shoulders Top: Other Examples