# Head and Shoulders formations



## Sean K (8 July 2008)

New thread dedicated to stocks that have formed up a H&S, or reverse H&S.

These can pan out quite well for a trade going short of long. 

Just probabilities of course.

We can ID them in here and follow them through to see if the targets were met, or thereabouts. 

My first nom is BHP.

Looks to be breaking through the neckline where there should have been good support, and also looks like it may break the next important support at $40. The target coincides with long term support around $34. 

Will be interesting to see if the principle is valided more than not.


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## Sean K (11 July 2008)

kennas said:


> My first nom is BHP.
> 
> Looks to be breaking through the neckline where there should have been good support, and also looks like it may break the next important support at $40. The target coincides with long term support around $34.



 Broken support at $40 by the looks.


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## Miner (11 July 2008)

kennas said:


> Broken support at $40 by the looks.




So as per chart continuation BHP is heading towards $34 ?

The ASX 200 will get a thud surely

Cheers


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## Sean K (11 July 2008)

Miner said:


> So as per chart continuation BHP is heading towards $34 ?
> 
> The ASX 200 will get a thud surely
> 
> Cheers



That's what the formation says. 

Let's hope it doesn't work on this one!


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## panikhide (11 July 2008)

Nice observation Kennas. I was wondering when to get back into BHP 

Your head and shoulders prediction would appear to be consistent with those predicting that the XAO will fall to 4700-4800.


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## brendan87 (11 July 2008)

How is this? TSE 1 year.


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## Sean K (11 July 2008)

brendan87 said:


> How is this? TSE 1 year.



Good H&S, but hard to see it going though that long long term support.

Might though


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## Dutchy3 (12 July 2008)

This is a daily on PDN.

Might not be as noticeable on a bar chart

Volumes increased on the moves north to so a reasonable expectation of a base can now be supported


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## Sean K (13 July 2008)

Dutchy3 said:


> This is a daily on PDN.
> 
> Might not be as noticeable on a bar chart
> 
> Volumes increased on the moves north to so a reasonable expectation of a base can now be supported



Aaaah, dutchy, our first inverse/reverse H&S, nice.

But is it?

Is the left shoulder actually dipping below the head? Or, does that spike down have less validity than the steadier, rounder head? Not sure. And does it matter that much? The right shoulder looks like a shoulder. But is the recent move towards/through the neckline invalidating it for the moment. Maybe breaking back up through $6.50 will put it back in the picture. Lots of talk about POU reversing which would fundamentally assist. 

If valid, target as indicated, which happens to coincide with some previous resistance. Watch and shoot.


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## Dutchy3 (13 July 2008)

Hi Kennas

Here's another view. Weekly + volume represented by the width of the candles ...

I see the dominant whites that underpin all the price action on this one for the past six months. The last two weeks are rather indecisive and I might reasonably expect yet another week of this coming ....

I agree that a move through 700 would basically confirm the pattern then a matter of reading the script as it unfolds. Would not like to see a big black this week at any stage and / or a close at 600 as this would demonstrate a bit too much weakness at this stage ...


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## Wysiwyg (15 July 2008)

Okay, with my limited knowledge of charting this is my interpretation of what is unfolding.(note it`s the psuedo SPI 200 chart)

On the chart I can see that an inverted H&S formed around April/May.I think that the head of the previous H&S  may be the shoulder of an even bigger *inverted H&S *forming.The shoulder and neck have been formed and the head is in the process of being formed now.

This is simply a projection and because it`s projected may not happen. 
At least H&S patterns can be defined 

Any variations on this???


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## Sean K (16 July 2008)

Wysiwyg said:


> Okay, with my limited knowledge of charting this is my interpretation of what is unfolding.(note it`s the psuedo SPI 200 chart)
> 
> On the chart I can see that an inverted H&S formed around April/May.I think that the head of the previous H&S  may be the shoulder of an even bigger *inverted H&S *forming.The shoulder and neck have been formed and the head is in the process of being formed now.
> 
> ...



Pretty crystal ballish Wysi, we will see. I do hope that head appears soon! 


BHP doing it's best to hold close to $40 support, but is struggling. Currently $38.60. Surprised it's held up this well considering Zn and POO overnight. So, short side going ok on this at the moment.


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## Sean K (17 July 2008)

Dutchy3 said:


> Hi Kennas
> 
> Here's another view. Weekly + volume represented by the width of the candles ...
> 
> ...



H&S still in play for the minute, even though it's been smashed today due to the production shortfall. POU increases could turn it around, or market bear rally. Or, it's still trapped...


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## Sean K (21 July 2008)

This next one is not a good sight for me. 

I'm long BMN. 



Would expect $2.00 support to hold, but if not....


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## Dutchy3 (21 July 2008)

kennas said:


> H&S still in play for the minute, even though it's been smashed today due to the production shortfall. POU increases could turn it around, or market bear rally. Or, it's still trapped...




Yes isn't this rally today fasinating .... I'll need to look at the big value movers tonite and see what the volumes are like ... could this be a bit of a line in the sand? Was poised to short QBE on the close today but not going to collapse again today. PDN should be OK still as although it might loose favour to the Banks and top tier miners I can see it being sold off heavily anymore as the current formation has developed ov er the last six months while the rest of the market took so much pain


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## GreatPig (21 July 2008)

A few more weeklies on my watchlist, not all complete yet so may not eventuate. And WOR is perhaps a bit sus with such a small left shoulder.

GP


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## MRC & Co (22 July 2008)

That WOW chart is a great example GreatPig.

Even having a crack at that neckline once more, good low risk shorting opportunity right there.  

Cheers


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## GreatPig (22 July 2008)

On the daily chart, WOW has an inverse head and shoulders with a target of around $27, which is pretty much the neck line of the weekly one. Maybe yesterday was as close as it's going to get though.

GP


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## subaru69 (24 July 2008)

I'm no good at T/A and having some trouble copying the chart across (due to my computer skills) but could someone comment on ASX forming an inverse H&S pattern.

In my approximation the head has just formed, we should see a drop and then consolidation of price.  Neck-line should be about 33 as right shoulder will be higher than left. Lowest price was ~29. Which theoretically means a target around 37.


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## Sean K (25 July 2008)

subaru69 said:


> I'm no good at T/A and having some trouble copying the chart across (due to my computer skills) but could someone comment on ASX forming an inverse H&S pattern.
> 
> In my approximation the head has just formed, we should see a drop and then consolidation of price.  Neck-line should be about 33 as right shoulder will be higher than left. Lowest price was ~29. Which theoretically means a target around 37.



Hmmm, not really in my book subaru. The left shoulder isn't really pronounced enough, and the right shoulder was never forming up. Looks to have broken up now through the 32.5 - 33 resistance.


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## subaru69 (25 July 2008)

kennas said:


> Hmmm, not really in my book subaru. The left shoulder isn't really pronounced enough, and the right shoulder was never forming up. Looks to have broken up now through the 32.5 - 33 resistance.




Thanks, 

With your chart I agree totally.

Looks like that resistance wasn't long broken  (I own currently), would be nice if it was...

The chart you're using looks quite different (same numbers obviously) from the one I looked at on asx.com.au over a 6 month time-frame.

Is there a certain time-frame or scaling which is best?  I imagine the answer is individual to each situation.

Ps- what does one have to do to enjoy the life in Peru??


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## Sean K (26 July 2008)

subaru69 said:


> Thanks,
> 
> With your chart I agree totally.
> 
> ...



Yeah, all depends on time frames really and weather you use a semi log scale as well. You see different things in charts over different time frames so I normally look at a 6 mth, 1yr, 2yr, and 3yr to get the full picture. 

Peru? You probably need to be a hippy and live in the Amazon, or work in the travel industry, or marry someone in the travel industry. And know some Spanish.


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## subaru69 (26 July 2008)

I know this sounds dumb, and I'm sure it's been answered on another thread, but where do I find good, free charts (including the semi-log kind).  It's very sad :error: but I feel that at the moment I'm trading with one hand behind my back probably due to :alcohol: or stupidity.  I'm an uber nube and appreciate any advice/encouragement. Alternatively  a good spanking might suffice. 

I finally worked out that you are on the 'smooth neck of the moon'.  My favorite song line ever is 'Now my helmet's on, you can't tell me I'm not in space..'.

Saluting your ability to live (with a woman, unlike most bloggers) in an exotic location. Keep it real, live the dream. :bowdown::bowdown:


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## Sean K (26 July 2008)

subaru69 said:


> I know this sounds dumb, and I'm sure it's been answered on another thread, but where do I find good, free charts (including the semi-log kind).



Yes, has been discussed a bit.  Go to advanced search and look for 'charts' in the title of threads. I just did it and there's a page of threads. Start from the top I suppose. Or, if you see someone with nice charts, send them a PM for the provider.


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## zolow (30 July 2008)

Alright... I'm probably lacking a little in the nuances of tech analysis. I would like to pose a question that hopefully those more experienced can answer:

Has the second shoulder of a downtrending head and shoulders just formed for the ASX?

I know you can have uptrending and down trending head and shoulders formations, but can you even a head and shoulders that steep?


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## PLooB (30 July 2008)

zolow said:


> Alright... I'm probably lacking a little in the nuances of tech analysis. I would like to pose a question that hopefully those more experienced can answer:
> 
> Has the second shoulder of a downtrending head and shoulders just formed for the ASX?
> 
> I know you can have uptrending and down trending head and shoulders formations, but can you even a head and shoulders that steep?




I'd say the ASX200 is in a downtrend with resistance around 5200


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## Wysiwyg (2 August 2008)

Wysiwyg said:


> Okay, with my limited knowledge of charting this is my interpretation of what is unfolding.(note it`s the psuedo SPI 200 chart)
> 
> This is simply a projection and because it`s projected may not happen.
> At least H&S patterns can be defined
> ...




Well it was certainly my optimistic bias here in which I was wrong.An orderly procession down appears to be necessary.


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## Sean K (3 August 2008)

kennas said:


> My first nom is BHP.
> 
> Looks to be breaking through the neckline where there should have been good support, and also looks like it may break the next important support at $40. The target coincides with long term support around $34.
> 
> Will be interesting to see if the principle is valided more than not.



BHP still in play after making it to $36 on the way down and then recovering back to $40 resistance. Failed, and looks to be heading back down. For the moment. Who knows in this crazy market. Where's the bear rally!


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## Tukker (4 August 2008)

So Your typical Head and Shoulders signals a bearish trend, whereas the inverted Head and Shoulders signals the potential for a bullish trend?


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## Go Nuke (4 August 2008)

Tukker said:


> So Your typical Head and Shoulders signals a bearish trend, whereas the inverted Head and Shoulders signals the potential for a bullish trend?




Yep you got it!

Here's some simple charts and explainations for you

*H&S at a top*
http://www.recognia.com/reference/patterndescr_hst.htm

*H&S at a bottom*
http://www.recognia.com/reference/patterndescr_hsb.htm


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## Sean K (6 August 2008)

Well, BHP made it close to the target which is good enough. Still could go further I suppose, and might until it breaks up through 42.

Has LEI been mentioned?

Looks ordinary.

This is on my blue chip potential buy for the grandkids list too...

Now on the short list.


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## subaru69 (7 August 2008)

Maybe I'm just being hopeful 

But I think this may be an inverse H&S pattern 

It would be nice if ASX tracked up, from memory it tends to act as some sort of leading indicator...


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## Go Nuke (9 August 2008)

Ive found a possible *Inverse H & S*
If oil rebounds, so will this stock imo

Nice thread by the way. Very informative for all


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## happyjack (13 August 2008)

This is unusual as it is 4 in a row Note the measure is off as it is not possible to hold a mouse steady enough to get the second one the same as the first so I just get close.


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## Bolivia (26 August 2008)

Not sure how to post a graph but CSR looks like a nice looking inverted head and shoulders.

Anyone care to analyse?


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## Sean K (26 August 2008)

Bolivia said:


> Not sure how to post a graph but CSR looks like a nice looking inverted head and shoulders.
> 
> Anyone care to analyse?



Might be Bolivia, but a little tenuous.

Coincides with some resistance which is promising. 

(you should do a search on 'how to post charts' and you'll get it.


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## pistol72 (1 September 2008)

A question re H+S on the weekly WOW chart
We have a head and shoulder pattern with a solid close below the neckline.Now,does the throwback into the pattern confirm that its a failed pattern??
cheers Pete
ps... another inverted h+s ,platinum asset .PTM


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## BentRod (9 September 2008)

Here is one Chaps. 

IPL.

Seems like a break of the low in August is a critical technical level.


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## Sean K (9 September 2008)

pistol72 said:


> A question re H+S on the weekly WOW chart
> We have a head and shoulder pattern with a solid close below the neckline.Now,does the throwback into the pattern confirm that its a failed pattern??
> cheers Pete
> ps... another inverted h+s ,platinum asset .PTM



Could do. On a 3 year weekly still looks vulnerable to revert back until it breaks 29 ish, IMO. Or, the effect of the H&S when it broke down through 26 and hit 23, is all it could manage to the downside.


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## BentRod (14 October 2008)

Target met for IPL or is it just filling that gap before heading lower?

I favour heading lower.


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## Sean K (15 October 2008)

Some potential forming up here.


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## Sean K (5 November 2008)

kennas said:


> Some potential forming up here.



LOL, was just scanning some stocks and came up with the same one as above.

Looks promising on a break through the neck at $60 which is also long term resistance back to early 07.


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## Moneybags (5 November 2008)

kennas said:


> LOL, was just scanning some stocks and came up with the same one as above.
> 
> Looks promising on a break through the neck at $60 which is also long term resistance back to early 07.




Interesting Kennas, thanks for posting, volume not very encouraging.

MB


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## Sean K (14 November 2008)

kennas said:


> Has LEI been mentioned?
> 
> Looks ordinary.
> 
> ...



And I didn't short it on the breakdown, like a rabbit in the spotlights..... 

Or, maybe the short ban was on then...


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## joeyr46 (16 November 2008)

kennas said:


> Could do. On a 3 year weekly still looks vulnerable to revert back until it breaks 29 ish, IMO. Or, the effect of the H&S when it broke down through 26 and hit 23, is all it could manage to the downside.




I think it has to break 30 on volume but that will complete a inverted H&S have tried to include chart but not sure I got it


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## joeyr46 (16 November 2008)

kennas said:


> LOL, was just scanning some stocks and came up with the same one as above.
> 
> Looks promising on a break through the neck at $60 which is also long term resistance back to early 07.




Long term looks like it supported on trend line c ould be a good move if volume picks up on break Thank you


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## Sean K (12 December 2008)

COH has failed at the neckline, but the formation still in play longer term.


BHP just failed at a neckline of some sorts.

Break through target $42.


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## Sean K (20 January 2009)

kennas said:


> COH has failed at the neckline, but the formation still in play longer term.
> 
> BHP just failed at a neckline of some sorts.
> 
> Break through target $42.



BHP false break for a day at $32 and hovering under again. The Chartist has been shorting it around that level, so we can blame them. lol

COH moving back up towards this great wall at $60. Would be surprised in Nick was shorting it around these levels too.


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## Tukker (22 January 2009)

So im trying to get my head around this head and shoulders method. Can someone confirm if this is an example of one?

Thanks


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## Wysiwyg (22 January 2009)

Tukker said:


> So im trying to get my head around this head and shoulders method. Can someone confirm if this is an example of one?
> 
> Thanks




Yes but what significance at the bottom of a trend???Your example is usually a topping pattern.An inverse H&S for a bottoming pattern is illustrated below by kennas (BHP) but the likelihood of it panning out as a bottoming pattern is highly unlikely under present economic circumstances.


p.s. the right shoulder is ill-defined at this stage so I wouldn`t jump to conclusions like that.


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## Sean K (22 January 2009)

Tukker said:


> So im trying to get my head around this head and shoulders method. Can someone confirm if this is an example of one?
> 
> Thanks



Tukker, This isn't a really great example of a H&S, but nonetheless there. It's a bearish H&S and you look to short these on a break down through the neckline. Target about $25 ish. But I'm not sure how valid this one is, the right shoulder is a bit weak.


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## Wysiwyg (22 January 2009)

kennas said:


> Tukker, This isn't a really great example of a H&S, but nonetheless there. It's a bearish H&S and you look to short these on a break down through the neckline. Target about $25 ish. But I'm not sure how valid this one is, the right shoulder is a bit weak.





Also worth remembering kennas ... 




> The Breaking of the Neckline and the Potential Return Move
> 
> As seen from the below, the head-and-shoulders pattern is complete when the neckline is broken; the trend is then considered reversed, and the security should be heading in a new direction. The point of breakout is when most traders following the pattern would enter the security.
> 
> However, the security will not always just continue in the direction suggested by the pattern after the breakout. For this reason it's important to be aware of what is known as a "throwback" move. This situation occurs when the price breaks through the neckline, setting a new high or low (depending on the pattern), followed by a retreat back to the neckline.




I would add to that ... not only back to, but beyond the neckline sometimes.


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## Tukker (22 January 2009)

kennas said:


> Tukker, This isn't a really great example of a H&S, but nonetheless there. It's a bearish H&S and you look to short these on a break down through the neckline. Target about $25 ish. But I'm not sure how valid this one is, the right shoulder is a bit weak.




Right, i think i am beginning to understand. So what point would the right neckline be established? If the price went sideways for a bit and then broke below the neckline established at around $35, or is it more like 37?


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## Sean K (22 January 2009)

Tukker said:


> Right, i think i am beginning to understand. So what point would the right neckline be established? If the price went sideways for a bit and then broke below the neckline established at around $35, or is it more like 37?



Around 37 at the moment. As was mentioned though this right shoulder is pretty weak and another factor is that it's actually making some higher lows and highs which is a positive sign. Not a high probability of this one turning out imo, so that means it will!


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## nomore4s (22 January 2009)

Head and shoulder formations are a reversal pattern.

So the pattern on RIO isn't really valid - sorry Kennas - as RIO is already in a strong down trend, you could argue it's a continuation pattern on the RIO chart maybe. I would actually put Rio in an ascending triangle atm which could be either bearish or bullish depending on which way it breaks

You want to see true head & shoulder patterns either at the top or bottom of trends. Although I don't think you will find many at the top of trends atm
BHP and COH currently are good examples - COH is very noticable on the weekly chart, both just need to activate now - especially BHP, if it can't break the neckline with conviction on the next attempt the pattern would change, already it's borderline imo.


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## nomore4s (22 January 2009)

COH example on the weekly chart


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## tradingftw (9 February 2009)

Would anybody care to comment on this NXS pattern? Wondering if the spike down in early October invalidates the H&S pattern? Also should the fact that the neckline was not broken in early Feb be taken as failure or is it possible to have a cup and handle within the overall pattern on the RS?

Cheers

Tim


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## OzWaveGuy (9 February 2009)

tradingftw said:


> Would anybody care to comment on this NXS pattern? Wondering if the spike down in early October invalidates the H&S pattern? Also should the fact that the neckline was not broken in early Feb be taken as failure or is it possible to have a cup and handle within the overall pattern on the RS?
> 
> Cheers
> 
> Tim




Haven't followed NXS, but the pattern shown strongly resembles a triangle - Indicating a breakout to the downside, followed by a reversal.


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## Wysiwyg (11 February 2009)

As stated elsewhere, after the head and shoulder formation, a tendency to revisit the neckline is observed.

Example just recently of the djia doing exactly that.Note the timing on the hour. A loosely orchestrated game I suggest.


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## Sean K (11 May 2009)

This looks to be breaking up.


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## db96 (28 May 2009)

Anyone looking at QBE? Quite bearish. Recently broke thru neckline at about $20.


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## johnnyg (9 July 2009)

RMD looks to be completing a complex Head and Shoulder pattern. Might be one to keep an eye on.


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## tech/a (10 July 2009)

XAO

You'll notice that many patterns mimick the index.
This has occured at most times where a *confluence* in price action in many other stocks preceeds longer term moves.

In the major downturn many stocks were in stage 5 of 5 Elliott counts as was the Index.
Ive noticed when there are a number of stocks displaying similar counts its a MONTE!

This is likely to be similar.


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## Sean K (10 July 2009)

tech/a said:


> XAO



Well picked up tech! 

Target around some support, but not where the W5 is supposed to go. Maybe there's a bounce about there.


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## Buckeroo (11 July 2009)

I'm no expert on charts, but did noticed with gold, broke through the neckline - is it headed toward 870 or even lower?

Cheers


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## makingmoney (11 July 2009)

Buckeroo said:


> I'm no expert on charts, but did noticed with gold, broke through the neckline - is it headed toward 870 or even lower?
> 
> Cheers




Well thats what the chart could be indicating...but a word to the wise.."Everyones jumps on gold in war-time scenario"..what im saying in english is that in my person opinion short-term the market could fall by a further 10% with up and coming end of year reports..Myself and a lot of traders i know in rl are thinking 2-3wks coming up could be a downturn..if this plays out then its hard to even imagine gold going down..cause in a panic everyone jumps to gold.Gold is a defensive stock when the market is negative,so it my pay dividends to re-evalutate the charts.And if your charts are suggesting gold going down-ward well quite could mean the bulls r coming out again..id say this may be august..id say the bears r coming out in july


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## Annwn (11 July 2009)

XAO
Showing a Head & Shoulders top, bearish reversal signal
L shoulder has occurred after a 2 month uphill run

Vol up on L shoulder and head formation, falling away during R shoulder forming.

Possible senario - pull back to trendline then price to fall to support level where price fell to last time ? around the 3100 level

Cheers
Annwn


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## sammy84 (11 July 2009)

Buckeroo said:


> I'm no expert on charts, but did noticed with gold, broke through the neckline - is it headed toward 870 or even lower?
> 
> Cheers




H&S dont tend to be the most reliable patterns indicating a reversal. Studies have shown that on average if you were to enter a trade at the break of a neckline, after 10 days you would be sitting on a .7% loss.

Two articles for those who are interested;

http://www1.uni-hamburg.de/IWK/shoulder.pdf

http://articles.moneycentral.msn.com/Investing/PowerTools/DontBetTheRentOnTechnicalAnalysis.aspx


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## Buckeroo (11 July 2009)

Thanks people for your comments - much appreciated

I am very much of the same opinion. With the reporting season just around the corner (and I reckon it will be bad), then a jump to gold is on the cards. I will keep my eye on it just the same.

Interesting about the study - I hadn't seen this before

Cheers


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## Strident (11 July 2009)

Annwn said:


> XAO
> Showing a Head & Shoulders top, bearish reversal signal
> L shoulder has occurred after a 2 month uphill run




There seems to be non-confirmation from the Dow where the neckline appears to have been invalidated.

Considering the alternative scenario is a three-wave retracement that is complete already (edit: That ought to be "an alternative" and "or close to complete" - other scenarios are plausible and even this one could still continue for a bit), I'm just a bit cautious about going short at this stage.


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## Annwn (12 July 2009)

sammy84 said:


> H&S dont tend to be the most reliable patterns indicating a reversal. Studies have shown that on average if you were to enter a trade at the break of a neckline, after 10 days you would be sitting on a .7% loss.




Great articles thanks
Bulkowski states - H&S are 93% reliable, with 63% meeting predicted price target,  who do you follow, open to interpreation from where you sit?

Another stock - BKY Berkley Resources

Listed as a spec buy of the week in a trading newsletter

Cheers


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## Garpal Gumnut (16 July 2009)

tech/a said:


> XAO
> 
> You'll notice that many patterns mimick the index.
> This has occured at most times where a *confluence* in price action in many other stocks preceeds longer term moves.
> ...




Been reading through ASF stocks posts, posted over the last month and this one will prove to have been the most prescient.

gg


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