Friday, April 14, 2006
Head and Shoulders
This formation is generally seen at the end of long trends. Completion of the formation changes from 1 month to 1 year and it is a very important signal for trend reversal.
Volume is very important for Head and Shoulders formation. The most of the volume occurs under left shoulder and decreases significantly during correction. After pull back, prices start to increase again but the volume is less than that of left shoulder which indicates a weakness .Since the volume is not enough to carry the prices to new highs, a new correction starts. Decreasing volume is the first warning signal for the formation. The right shoulder is the last attempt with lower volume . Breaking of the neck line confirms the Head and Shoulders formation and down trend starts.
http://www.borsanaliz.com/eng/formations.htm
Volume is very important for Head and Shoulders formation. The most of the volume occurs under left shoulder and decreases significantly during correction. After pull back, prices start to increase again but the volume is less than that of left shoulder which indicates a weakness .Since the volume is not enough to carry the prices to new highs, a new correction starts. Decreasing volume is the first warning signal for the formation. The right shoulder is the last attempt with lower volume . Breaking of the neck line confirms the Head and Shoulders formation and down trend starts.
http://www.borsanaliz.com/eng/formations.htm
# posted by Cherie : 3:39 PM
