But what does this tell us as traders ? Well, if your indicators show you all a clear bullish signals, you should not go long. Its much better, if you wait until the last low or high have been retested and wait if your signals are still bulish after that, then you have much better odds that your trade will work out. But thats not always the case, but generally said, its the best to wait for this scenarios, if you are unsure whats going on. And mostly if you are unsure you will lose money.
Here we have a wonderful down move, but without a retesting of the High on the shorter times = Daily. But on the higher times = Weekly, we have it clear, it hit the price. Thats more a setup for the more experienced trader. The easiest thing to trade you can find is a HTP on the higer times, lets say on the weekly and a Head and should or double / triple top/bottom with a shoulder on the lower times, lets say on the daily, and on the more lower times the same, let say 4hours and 1hour. The best scenario is to enter on the shoulder. The first shoulder is the best, sometimes there is a second shoulder, before patter fullfill its self, but thats rare. Only enter on the first shoulder. Trading this pattern without a shoulder is only for the experienced trader.
Corn (cbot) HTP on Weekly Head and shoulder on 4hours The shoulder on the 4hour chart appeared exactly on the open of the floor trading session.
USDCHF 4 heads without a shoulder, also called 3 or 4 little indians, by Linda Raschke. Whatever its a higher high situation of 2 or more, usually 2 or 3, 4 is more rare - without a shoulder. HTP on the Weekly Shoulder on the lower times.
And the last picture. Orange Juice (ICE) with some nice Highs and Lows retesting. Support and resistance is King.