█ OVERVIEW
A head and shoulders chart pattern is a technical pattern used to identify potential trend reversals, specifically in the context of a bullish trend transitioning into a bearish trend. This pattern is widely recognized and is considered one of the most reliable trend reversal patterns in TA.
H&S patterns have 3 components
1 — Left Shoulder: This is the first peak formed during an uptrend. It represents a temporary high point in the price movement.
2 — Head: The second peak, which is higher than both the left shoulder and the subsequent right shoulder. The head is the highest point in the pattern and is usually accompanied by higher trading volume. It represents a significant resistance level.
3— Right Shoulder: This is the third peak, often lower than the head, but higher than the left shoulder. It resembles a smaller peak formed after the head. The right shoulder is followed by a decline in price.
The pattern completes when a trendline AKA the "neckline," connects the lows between the left shoulder, head, and right shoulder, acting as a support line. Once confirmed, price will continue falling below the neckline, signaling the trend reversal from bullish to bearish.
SPX
closed 8.24.2023 at $4,376.
There is a gap from the breakout level a confirmed H&S will likely fall towards, around $4200.
A head and shoulders chart pattern is a technical pattern used to identify potential trend reversals, specifically in the context of a bullish trend transitioning into a bearish trend. This pattern is widely recognized and is considered one of the most reliable trend reversal patterns in TA.
H&S patterns have 3 components
1 — Left Shoulder: This is the first peak formed during an uptrend. It represents a temporary high point in the price movement.
2 — Head: The second peak, which is higher than both the left shoulder and the subsequent right shoulder. The head is the highest point in the pattern and is usually accompanied by higher trading volume. It represents a significant resistance level.
3— Right Shoulder: This is the third peak, often lower than the head, but higher than the left shoulder. It resembles a smaller peak formed after the head. The right shoulder is followed by a decline in price.
The pattern completes when a trendline AKA the "neckline," connects the lows between the left shoulder, head, and right shoulder, acting as a support line. Once confirmed, price will continue falling below the neckline, signaling the trend reversal from bullish to bearish.
SPX
closed 8.24.2023 at $4,376. There is a gap from the breakout level a confirmed H&S will likely fall towards, around $4200.
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Target range touched by SPX intraday on 9/27/2023
Eric Thies
