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SE ND | Hi Dublin,
I don't mean to speak for JP, and if I tell you wrong I hope he sets me straight. A head and shoulders pattern to me is nothing more than a wash. They happen in all time frames, but the larger ones obviously take longer and are no doubt being set up by the whales. A head an shoulder pattern obviously has a two shoulders, the first shoulder on the left, imo, is the coiling where the whale is working off their position to either neutral or they are slowly taking the opposite position of the current trend. The head is where they let the market run hard with trend. They give it a little push to get it started and suck in the guppies, and then sharply reverse course and push it the other way creating the wash. The last shoulder I view as a retest of the buyers. Retesting the "scene of the crime." This is an important area since often if price is blown out of the hole after the wash there is stored energy in the move out of the hole. This retest will often allow for a great opportunity to put a trade on with a manageable place to put a stop below the wash. Again this happens in all time frames.
I will add that not all head and shoulders will confirm. We saw this happen in beans after the pullback from the big drop a year ago. I was pointing out on NAT how great the shampoo pattern looked and was projecting price higher. JP told me I better pullback on the reins a little and realize that if it's that obvious, often they will fail....and it did...
But look at Chicago wheat towards the end of last year. It had a head and shoulders pattern, but not many noticed it. The pattern was confirmed and it rocketed higher to the ML of the controlling fork at that time. As JP tell us often, context is everything.
Sorry, but I don't have time to share charts with this right now. Maybe later tonight I can.
Take care. | |
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Soybeans
