Pring Crib Notes2

Discussion in 'Technical Analysis' started by Mr. DNA, Oct 26, 2002.

  1. Mr. DNA

    Mr. DNA

    ** Visuallize***

    A reversal top on V shaped volume.

    Return for others


    Head and Shoulders Formations:

    remember: H and S are supposed to be reversal patterns. If they "fail" the price does not reverse and a continuation pattern is in place.

    So this means that if you are in a head and shoulders top and you want to stay in your position expecting a higher peak, you want the H and S patern to fail!!!!!!!!!!!!

    Major Rule:

    H and S Tops need low volume on the right shoulder because it is to be a failed rally.

    H and S Bottoms need expanding volume on the right shoulder if the rally is to carry through.

    Occur as:

    Upward reversals

    Downward Reversals

    Continuation Formations

    Consolidation Formations

    Classic "Horizontal" Head and Shoulders consists of:

    The Head as the final Rally

    Ths Shoulders as two smaller but not necessarily identical rallies

    Define the Neckline -

    a trendline joining the ?

    low of the left shoulder and the head

    [but not necessarily the right shoulder?]

    The pattern is completed when?

    The pattern breaks decisively below the neckline.

    The most important thing to watch for is that volume on the left shoulder, and sometimes the head, should be noticeably heavier than that associated with the right shoulder, In fact, the right shoulder is the first rally in the new bear trend, so you should expect the right-shoulder rally to be somewhat anemic, and for volume to contract as the price works its way higher.

    Draw this:

    The other point to observe is that the retracement rally, if there is one, should be associated with low and declining volume.

    This is the retracement after the fall off of the right shoulder.


    1. Measure the distance from the head to the neckline.
    2. Project it downward from the breakout point.
    3. Remember: The longer and deeper the pattern, the greater its significance

    H and S Formations come in many shapes and sizes.


    Simultaneously indicates a neckline violation and the reversal of peaks and troughs. = one signal

    Upward Sloping

    Gives two signals because the upward sloping break occurs intwo parts.

    Neckline break is first

    [Full Signal] Peak and trough break comes later.

    `Downward Sloping

    Note that the minimun ultimate price objective should be drawn when analysing any H and S Pattern.


    Reverse Head and Shoulders.
    Inverse Head and Shoulders
    Head and Shoulders bottoms.

    The final low is the head separated by two smaller declines.

    Appear at the end of a downtrend.

    Continuation [Consolidation] H and S patterns.

    Similar to a rectangle consolidation pattern. the difference is in the calculation of the measuring objective. Use the head instead of the height of the of the rectangle. JL

    Ascending H and S Failures:

    Often followed by explosive advances.

    The 1-2 Rule:

    1. If the price violates the solid trendline, joining the head and the right shoulder, especially with expanding volume, it can be a signal of head and shoulders failure.

    2. The level of the right shoulder can be used if the trendline joining the head with the right shoulder is particularly steep.

    Steep trendlines are less reliable than those with a more shallow angle of ascent.

    Pring 10/24

    Inverse H and S Failures:

    Follow the same rules but upside down.

    Low of the left shoulder
    Low of the head.

    Listen to H and S Examples again.

    "Volume is not important on the downside because a ship can sink in a quiet sea"

    Art Cashin

    Pring 11/25

    Double Tops and Double Bottoms:

    Less common than H and S Patterns
    Usually offer fairly reliable signals
    Second top usually lower than first
    Most importand charachtoristic:
    Second top should have what? LOWER VOLUME THAN 1ST.
    As volume goes with the trend
    this pattern is bearish.
    Volume has tendency to pick up when?
    After the second peak is formed, especially after prices have fallen below the valley line. [which is the ]
    Horizontal trendline separating the two tops.
    This two is abnormal because,
    In a healthy market, volume declines with prices it does not expand.
    Obtain the Measuring Objective using the:
    Higher peak
    Double bottom is a mirror image of a double top.
    "The breakout above the intervening rally high must be accompanied by expanding volume; otherwise the breakout is suspect.
    Shared charactoristic of double tops and double bottoms:
    definite decline in volume at the second bottoM.

    The main point is that volume is distinctly lower.
    Quite often the first bottom is actually a _______
    Selling climax,
    So, the second one represents a:
    test of the low which turns out to be successful.
    As price rises, it should expand slowly to the breakout point, then expand noticeably.


    Multiple bottom formations are far more common than multiple top foundations