A trend line or neckline is drawn connecting the "Head and Shoulders" pattern to determine
the potential trade opportunities and targets. The neckline can be also formed in an angle
(slanted).
Trade:
Connect "Head and Shoulders" bottoms in a trend line or neckline. When the price closes
below the neckline, a potential short trade is signaled. Short one tick below the breakdown
bar's low.
Target: Compute the vertical distance between the "apex" of the "Head and Shoulders"
pattern and the neckline. The target is set below this distance from the neckline.
Stop:
After a trade entry, if the price closes above the neckline, a potential failure of the pattern is
signaled. Place a "stop" order above the neckline.
the potential trade opportunities and targets. The neckline can be also formed in an angle
(slanted).
Trade:
Connect "Head and Shoulders" bottoms in a trend line or neckline. When the price closes
below the neckline, a potential short trade is signaled. Short one tick below the breakdown
bar's low.
Target: Compute the vertical distance between the "apex" of the "Head and Shoulders"
pattern and the neckline. The target is set below this distance from the neckline.
Stop:
After a trade entry, if the price closes above the neckline, a potential failure of the pattern is
signaled. Place a "stop" order above the neckline.