Help invert head and shoulders?
- Thread starter Emmanuel
- Start date
Hi Emmanuel:
Yes, this is a perfect Head and Shoulders formation.
However, I strongly suggest you don't buy until you see an entire candle completely above the neckline.
In other words, let the market proves to you that it means business
Which pivot high are you talking about exactly (see image below)?
To original poster, your take-profit (if trade is initiated) should be in the 10960 area, according to the "measured move" rule for Head and Shoulders formations.
Good luck.
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Sorry but a close above pivot high 4 is a very bad choice. You think you are "saving" some money and reducing your risk but in reality you are only taking more risk.
What you need here is a clear penetration of the neckline (red line), period. If the price does not go above the neckline and stay there for at least a couple of candles, then you have no confirmation that the Head and Shoulders formation is now resuming its uptrend after the pullback.
And no confirmation, no trade.
A more conservative way to trade that formation is to wait for a close above pivot high 1, with a stop at the neckline. If the stop is triggered then a re-entry is possible is price closes above pivot 1 again. A triple pullback on successful Head and Shoulders formations is possible but rare.
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RSI is being respected if this was 1 day trade, I would be long at market right now with stop below the last low.
Since all trades have a 50/50 percentage of working out and only increase or decrease based on your skills after you get dealing with managing the trade, it might be a bad choice for how you trade. But I scalp the ES and other Indexes. When I take long term trades in stocks, I only use weekly bars, so timeframe might have something to consider as well. Bottom line, unless the one who originally asked the question puts in the time, our answers are what works for us. And I am saving money cause I risk in ticks and not hundreds, so I require more precise entries in day trading.
I use a good deal of John Hills books from late 1970 where he speaks of "Thrust" bars and a close beyond a pivot has tested out well for me. Matter of fact, I use close beyond last pivot, so long as not an outside bar, as my identification of trend. We all trade differently, otherwise there wouldn't be any money to be made.
I use a good deal of John Hills books from late 1970 where he speaks of "Thrust" bars and a close beyond a pivot has tested out well for me. Matter of fact, I use close beyond last pivot, so long as not an outside bar, as my identification of trend. We all trade differently, otherwise there wouldn't be any money to be made.
Well, it is obvious that he/she is using the 5 min time frame.
But that's besides the point, after a pullback on a head and shoulders formation, if the price does not close above the neckline then we have absolutely no reason to believe that the formation we are looking at is at least still valid, end of story. In fact, a close below 10725 (the last pivot low) could signal serious trouble.
Anyway, we will soon find out if this is a real Head and Shoulders formation or just a bull trap...
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Sounds like a good approach but never take any trading idea for granted, no matter how clever it looks, backtest it first with any enough data, assuming the trading rules are clearly defined.
Absolutely.