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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: benwood who wrote (87620)10/12/2007 3:51:53 PM
From: Horgad   of 110194
 
If that is the right shoulder that the green line is currently making, it would be followed by a steep decline to complete the pattern.

Head and shoulders:
1. Steep rise
2. followed by an intial top and plateau (left shoulder)
3. followed by a blow-off top (head)
4. followed by a return to the intial top and plateau (right shoulder)
5. folowed by a steep decline

Or if you prefer the head is a middle finger sticking up between knuckles....thus the chart "flips you off" before it heads lower. :)

The reason I said the green line looks like an imperfect head and shoulders is that the right and left shoulders look quite a bit different. That is not all that uncommon, but I suppose that a chartest would say that it decreases the chances of the head and shoulders pattern completing as expected.

By the way the head and shoulders can also work in reverse to signal a bottom....

To make a good cup and handle you would need:
1. a rise
2. followed by a fall with a rounded bottom
3. followed by another rise close to the first
4. followed by a plateau or range that may be slightly downward (the handle)

The cup and handle is completed when the chart breaks out of the handle to make new highs.

I would say the green line is not a good cup and handle because the second high before the handle is no where near the first high, but there may be a cup and handle if you view it in a short enough time range.

All of this to me is mostly for fun and IMHO shouldn't be use as a primary trading tool. Most of the patterns can quickly evolve into something else and are mostly only "useful" in hindsight.
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