Complex H&S Playing Out on the S&P (SPX/SPY/ES..etc))

Discussion in 'Technical Analysis' started by Jumpshot, Jul 15, 2009.

  1. Jumpshot


    Head and shoulders sometimes have more then one shoulder which makes them "complex". In the following chart, you can see two left shoulders and two right shoulders. The right most shoulder is still forming.

    We have not busted the h&s formation just yet. I have a few stocks I want to fade if this plays out that I have posted in other threads (INTC, GS, etc)...a market correction will bring our winners down with them.

  2. Jumpshot


  3. Roman -

    Your thesis sounds a lot like the one Elliot Wavers constantly propose - "oh well, that wave didn't quite work out, let's try a different one and see if it works, ad nauseum...

    Same with you. "Well, the first Head and Shoulders didn't quite work out, let's make up another one and see what happens.

    And so it goes...
  4. PetaDollar

    PetaDollar Moderator

    I don't see what Elliot Wave has to do with this. If you study and use patterns (read Bulkowski) you know there are little things that can happen, which have nothing to do with trading them profitably. Anyway, this thread is fine. If you have some specific statistics compiled on H&S patterns and how it relates to this particular one, fire away. If you want to go on about how "TA doesn't work" there are plenty of other threads for THAT
  5. Jumpshot


    Here is how it works.

    No chart pattern is a guarantee in regards to an outcome. There is a certain statistical probability associated with each pattern and there are books out there, i.e. Encyclopedia of Chart Patterns, that provide a specific percentage. These percentages, however, were developed from one point in the market's history and may not apply today. Bulkowski even admits this fact in his blog.

    The challenge is to know how to manage the trade once you see the pattern.

    The real truth is that most trades are losers for most traders, but a tight stop takes the trader out of the trade and it can be a small loss. Most traders make their money only off of a few trades with the rest being losers.

    If I trade this H&S pattern 10 times on 10 different stocks, how many times do you think I will be successful? During the times I am not successful, a tight stop will take me quickly out of the trade. During the times I am successful, I will make big money to more then offset the losses.

    Chart patterns are there for you to make a trade more probable...they are not there to offer you a guarantee...

  6. Jumpshot


    I wanted to point something out about patterns in the market. The right side of the pattern tends to mirror the left side of the pattern. What we have now is a mirror image of the left side...

    The "mirror" theory tends to work about 75% of the time in my experience...
  7. You are, 100%, talking out of your ass with this comment. This may apply to your trading but this isn't even close to being accurate for me and I'm sure many others.

  8. Jumpshot


    Thats how I do it. My money is made off of 20% of my trades per year. I see a high-probability pattern and make my trade with a tight-stop.

    I recognize other methods such as pair trades, scalping, etc. I dont see too many guys lasting very long with those methods or writing books on how they made money off of scalping.

    Losers stay silent and shrink away while the winners write books about their success...

  9. Elliot Wave has nothing to woth this, you are correct. I was merely offering an example of fallacious thinking. EWavers are constantly making up new versions of their wave count until one just happens to conveniently work.

    Roman is doing the same thing here. The H&S failed. Fact. Plain and simple. He then came up with another version hoping it would work. That one FAILED today as well.

    End result - a whole lot of nothing about nothing.

    Have a great day...

    PS - And where in my original reply was I going on about "TA doesn't work". That's something YOU made up. FYI - I am a firm believer in TA. Correct TA. Not made-up TA.
  10. wutang


    Quoted from Edwards & Magee p. 56 "A head and shoulders which does not work is a warning that, even though there is still some life in the situation, a genuine turn is near. The next time something in the nature of a reversal pattern begins to appear on the charts it is apt to be final."

    I'd add to that that the weekly chart could still be forming a standard head and shoulders pattern, and that of course would actually be even more significant.
    #10     Jul 18, 2009