Nov 11, 2008

Head and Shoulders..!

The market's been through a lot these days.. the head & shoulders pattern (both upright and inverted) has been appearing on charts a lot recently.. I'm posting an example of one of the longer-term examples which I personally didn't believe would pan out.. if you're unfamiliar with the pattern, there's a short note available here. On the NIFTY, the pattern executed perfectly.. the rule is that the fall/rise would be equal to the distance between the head and the neckline..

It doesn't work everytime.. and one should never take a trade just on the basis of this pattern..but it is one of the more powerful chart patterns and is almost never ignored by a trader (which perhaps is a case of self-fulfilling which results in the pattern itself..) From my experience, I'd say it works 40-60% of the time...

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