Getting to Know the Head and Shoulders Pattern and Inverse Head and Shoulders
The Head and Shoulders and Inverse Head and Shoulders patterns are patterns where so you don't worry about how to determine if we have to buy or sell. This pattern is intended to show that the upward trend in the price of a stock or crypto is starting to end and spiraling downwards. Don't want to be left behind in the early price rally after going down for a long time? Want to know that big money does accumulation and distribution
If a swing trader identifies an upward & down by using candlesticks, until it is extraordinary that traders or trend followers identify signs of directional retrogression by using chart pattern reversal. One of them is Head and Shoulders and Inverse Head and Shoulders.
Moreover, by identifying this pattern, we can understand when big money is buying and selling (buying), and when they are starting to throw things away (distribution).
The head and shoulders itself has a shape with 3 small hills, where for a small hill located in the middle it will be bigger than the other 2 small hills on the sides.
Head and Shoulders (HnS) is one of the chart patterns that really helps us in seeing the retrogression of the direction of stock prices from rising to falling.
Meanwhile, Inverse Head and Shoulders (iHnS) helps us to see the retrogression of the direction of stock prices from falling to rising.
Thomas N. Bulkowski, author of the novel Encyclopedia of Chart Patterns said that this pattern is generally 60% successful in reaching its target.
The information was received from a total of close to 6000 trades in an uptrending market on a large duration span (bullish market). In fact, in the novel written by Thomas, there is much more complete information. One of them includes information when the force is down on a large duration span (bearish market). But in terms of whether it's an ascending or descending style, Thomas's report reports that it generally achieves its goal of always being 60%.
How is the accuracy in Indonesian stocks and cryptocurrencies?
Head and Shoulders Pattern
If it appears above, this head and shoulder (HnS) pattern is a sign of a bearish reversal, another name for an uptrend that is about to turn down.
In Indonesian stocks, this HnS pattern often occurs in large-cap stocks. Likewise in Cryptocurrencies, as well as in stocks on other exchanges, for example in the US market.
This is because in large-cap and highly liquid stocks, large investors have very many shares, so when big money wants to make a profit, they must sell it gradually and cannot run out once.
When large investors start distributing or selling, prices will fall with a large capacity. Big money is about to end the sale. At the same time, few retail investors buy the stock because they want to make short-term profits, and prices will rise but with little capacity. It could also be that big money does a mark up, buys a little so the price goes up, then sells it again with a large load capacity. World Health Organization knows?
When this happens repeatedly, until the price chart will create several highs, creating a bearish reversal pattern (downward retrogression), one of which is the HnS pattern.
Inverse Head and Shoulders Pattern
On the other hand, if it occurs at the bottom, then this pattern is a sign of a bullish reversal or a retrogression of direction from a downtrend to an uptrend, and is called an Inverse Head and Shoulders (HnS pattern overlap).
Likewise, when smart money starts to accumulate or buy, the price will increase with a large capacity. At the same time, retail investors start selling or taking profits when the price rises a little, then the price will go down with a small capacity. That's where smart money buys back and the price goes up with a large load capacity.
This has happened several times, as a result, a bullish reversal pattern (upward retrogression) is created, one of which is the Inverse HnS pattern.
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