RELIANCE: Head and Shoulders Breakout
Updated
THEORY:
This pattern forms after an extensive upside rally. It consists of a left shoulder, a head, and a right shoulder. The left shoulder is formed after a big bull rally in which the volumes are quite large.
At the end of the left shoulder, a minor correction takes place on the downside which happens on the low volumes comparatively the starting of the left shoulder. After this, again an up move can be seen on large volumes forming a head whose top is above the left shoulder following a correction on lower volumes & completing the head.
The completion of the head must be below the top of the left shoulder. If the prices fall down below the low of the left shoulder then too this pattern remains intact. In the end, the right shoulder is formed usually on smaller volumes comparatively the previous two rallies.
Now if you connect the bottoms of the left shoulder, head & the right shoulder there will be a formation of the ‘Neckline‘. This line will act as a decision line. If the prices break this neckline & give closing below the line, this will be the confirmation of the breakdown of the H&S pattern.
However, it has been noticed that after breaking of the neckline the prices again attracted towards this neckline. We say this phenomenon as a retest of the neckline which will add some more confidence while trading this pattern.
After retesting if the prices again come down this will be the final confirmation of the downside movement of the price as shown below.
The bookish target of this pattern is taken as the vertical price range from the top of the head to the neckline & the bookish Stop loss should be the top of the right shoulder. However this stop loss can be big, so it is advised to keep a stop loss of 4-5% of the price range above the neckline.
May 29
TRADING STRATEGY: GO SHORT WITH SL OF 2590 & LOOK FOR THE TARGET OF 2460/1365 IN THE COMING WEEKS.
NOTE: IF THE STOCK BREAKS THE RESISTANCE OF 2632 THEN IT WILL BE A H&S FAILURE PATTERN, WHICH WILL CALL A BULLISH ALTERNATE SCENARIO.
This pattern forms after an extensive upside rally. It consists of a left shoulder, a head, and a right shoulder. The left shoulder is formed after a big bull rally in which the volumes are quite large.
At the end of the left shoulder, a minor correction takes place on the downside which happens on the low volumes comparatively the starting of the left shoulder. After this, again an up move can be seen on large volumes forming a head whose top is above the left shoulder following a correction on lower volumes & completing the head.
The completion of the head must be below the top of the left shoulder. If the prices fall down below the low of the left shoulder then too this pattern remains intact. In the end, the right shoulder is formed usually on smaller volumes comparatively the previous two rallies.
Now if you connect the bottoms of the left shoulder, head & the right shoulder there will be a formation of the ‘Neckline‘. This line will act as a decision line. If the prices break this neckline & give closing below the line, this will be the confirmation of the breakdown of the H&S pattern.
However, it has been noticed that after breaking of the neckline the prices again attracted towards this neckline. We say this phenomenon as a retest of the neckline which will add some more confidence while trading this pattern.
After retesting if the prices again come down this will be the final confirmation of the downside movement of the price as shown below.
The bookish target of this pattern is taken as the vertical price range from the top of the head to the neckline & the bookish Stop loss should be the top of the right shoulder. However this stop loss can be big, so it is advised to keep a stop loss of 4-5% of the price range above the neckline.
May 29
TRADING STRATEGY: GO SHORT WITH SL OF 2590 & LOOK FOR THE TARGET OF 2460/1365 IN THE COMING WEEKS.
NOTE: IF THE STOCK BREAKS THE RESISTANCE OF 2632 THEN IT WILL BE A H&S FAILURE PATTERN, WHICH WILL CALL A BULLISH ALTERNATE SCENARIO.
Note
*Trade Still valid, any bounce shall be taken as selling opportunity for the mentioned target. Key level can be kept at 2580 clbs*Note
Note
Manish Bhardwaj (CMT L-1)
Analyst & Co-Founder
tradingsutra.com
waveutra.com
INSTAGRAM-
instagram.com/mansh_25
TWITTER-
twitter.com/mansh_25
YOUTUBE -
@TRADINGSUTRA @WAVESUTRA
Analyst & Co-Founder
tradingsutra.com
waveutra.com
INSTAGRAM-
instagram.com/mansh_25
TWITTER-
twitter.com/mansh_25
YOUTUBE -
@TRADINGSUTRA @WAVESUTRA
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