"Head and Shoulders Bottom" or "Inverse Head and Shoulders" pattern formation on daily chart of BANDHANBNK.
This pattern is often used by traders to identify potential trend reversals in financial markets, particularly in stocks. The pattern indicates a shift from a downtrend to an uptrend.
Here's a breakdown of the pattern:
Downtrend and Accumulation: The pattern typically forms after a prolonged downtrend. During this period, the price reaches a bottom and starts to consolidate, forming what you referred to as a "period of accumulation."
Three Declines: The pattern is characterized by three price declines: a lower low (the head) surrounded by two higher lows (the shoulders) that are roughly at the same level. The head and shoulders create a distinct visual pattern that resembles a head with two shoulders on each side.
Volume: In the context of this pattern, volume plays a significant role. It's usually highest during the formation of the left shoulder and the head. As the right shoulder forms, volume tends to decrease, indicating diminishing selling pressure.
Neckline: The neckline is drawn by connecting the highs of the two shoulders. It acts as a resistance level that needs to be overcome for the pattern to be confirmed.
Reversal Confirmation: The pattern is confirmed when the price breaks above the neckline. This breakout is typically accompanied by a surge in volume, indicating increased buying interest. This breakout suggests that the selling pressure that had dominated the downtrend is waning, and buyers are gaining control.
Price Projection: Traders often project a target for the new uptrend based on the pattern's height. This can be done by measuring the vertical distance from the lowest low (the head) to the neckline and then adding that distance to the neckline breakout point.
It's important to note that while the Head and Shoulders Bottom pattern can be a powerful tool for identifying potential trend reversals, it's not foolproof. Not all instances of this pattern lead to successful reversals, and false breakouts can occur. As with any technical analysis pattern, it's advisable to use it in conjunction with other indicators and analysis methods to increase the accuracy of your trading decisions.
Note for everyone who came across this reference:
This pattern is often used by traders to identify potential trend reversals in financial markets, particularly in stocks. The pattern indicates a shift from a downtrend to an uptrend.
Here's a breakdown of the pattern:
Downtrend and Accumulation: The pattern typically forms after a prolonged downtrend. During this period, the price reaches a bottom and starts to consolidate, forming what you referred to as a "period of accumulation."
Three Declines: The pattern is characterized by three price declines: a lower low (the head) surrounded by two higher lows (the shoulders) that are roughly at the same level. The head and shoulders create a distinct visual pattern that resembles a head with two shoulders on each side.
Volume: In the context of this pattern, volume plays a significant role. It's usually highest during the formation of the left shoulder and the head. As the right shoulder forms, volume tends to decrease, indicating diminishing selling pressure.
Neckline: The neckline is drawn by connecting the highs of the two shoulders. It acts as a resistance level that needs to be overcome for the pattern to be confirmed.
Reversal Confirmation: The pattern is confirmed when the price breaks above the neckline. This breakout is typically accompanied by a surge in volume, indicating increased buying interest. This breakout suggests that the selling pressure that had dominated the downtrend is waning, and buyers are gaining control.
Price Projection: Traders often project a target for the new uptrend based on the pattern's height. This can be done by measuring the vertical distance from the lowest low (the head) to the neckline and then adding that distance to the neckline breakout point.
It's important to note that while the Head and Shoulders Bottom pattern can be a powerful tool for identifying potential trend reversals, it's not foolproof. Not all instances of this pattern lead to successful reversals, and false breakouts can occur. As with any technical analysis pattern, it's advisable to use it in conjunction with other indicators and analysis methods to increase the accuracy of your trading decisions.
Note for everyone who came across this reference:
- This chart analysis is only for reference purpose.
- This is not buying or selling recommendations.
- I am not SEBI registered.
- Please consult your financial advisor before taking any trade.
Trade closed: target reached:
Educational Target closed!