Trading Head and Shoulders Failure

Trading Head and Shoulders Failures Pattern

The example above illustrates a "Head and Shoulders" pattern failure from the Russell 2000 Emini chart. On April 4 2007, ER2 formed a "Head and Shoulders" pattern with inclined (slanted) neckline. On April 5 2007, a trend line breakdown is anticipated for a "Head and Shoulders" pattern. This pattern is an example of reversal formation as "Head and Shoulders" pattern failed and continued in a reverse direction from the previous trend.

1. Enter a "long" trade above the high of the right side shoulder.

2. Place a "stop" below the low of the prior swing before the trade.

3. Target 100% of the depth of the "Head and Shoulders" pattern from the trade entry.

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